Timberland Investing for Financial Planning Clients

Fasano, George A.; Straka, Thomas J.
March 2009
Journal of Financial Planning;Mar2009, Vol. 22 Issue 3, p56
Academic Journal
• As traditional integrated forest products companies sell off their timberland to real estate investment trusts and other investors, timber as an investment is becoming more accessible to the smaller retail investor. This article looks at the various vehicles financial planning clients can invest in for timberland, as well as factors influencing its returns and how it correlates with other types of investments. • The article briefly explains some of the basics of timberland, such as the types of timber and how they're harvested, and the three factors that drive price: biological tree growth, timber price changes, and changes in land value. • Also examined are the still-limited investment vehicles (there are few national and regional timber REITs) and timber investment management organizations, and two national timberland indexes. • The paper shows timberland's low correlation with other asset classes, and its typically lower volatility. In particular, timberland is an inflation hedge. • Timberland has its risks, including physical risks such as fire and disease, so geographic and tree-type diversification is crucial. Environmental regulations, changing building technology, international trade, and tax treatment are other risk factors. • Beyond retail investing, some planners' clients may own private family forests. These forest holdings often are overlooked as a formal part of their investment portfolio.


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