May 26, 2018 11:38 am

Money, now also growing on trees

You’ve read the heading correctly, but it’s not as simple as you would hope.

Ever since the financial crisis people have been trying to diversify their investments and think a little outside of the traditional stocks and bonds. This opened the doors to the world of timber, however this isn’t an investment just anyone can undertake due to the high costs involved.

Investing in timber is a steady investment, it’s not going to see the same fluctuations as the stock market. It’s a slow industry that requires patience, that said it’s transparent and tangible. You can go and see how your trees are doing. Dennis Moon, head of Specialty Asset Management at U.S. Trust, a division of Bank of America has the job to find, manage and log plots of trees for the firms clients.

The real downside to such investments is that these types of assets are not cheap. The minimum timber investment at U.S. Trust is $5 million, that said this will buy you a couple of thousand acres which serve a recreational purpose also. The closer a tree is to be harvested, the more it is going to cost, after all the cash doesn’t come in until the trees come down.

When the trees are ready to be harvested, U.S. Trust will negotiate with the logging company, in order to ensure the most cost efficient and environmentally friendly manner. The client’s involvement in the matter is entirely optional according to Moon.

A possible downside for such an investment aside from the high starting costs is that you will need to be patient for the returns. Timber prices are also closely tied to the housing market which has not yet recovered to their pre-recession levels. It’s also a likely possibility that the value of timber may be inflated at the moment due to the increased investor demands.

Despite this, Moon still believes that this is a sound investment. What are your thoughts? Do you believe investing in trees is a good idea? Tell us in the comments.

via CNNMoney



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Michael Duvall