Investing in farmland versus investing in gold

Farmland vs Gold: Which Is A Better Investment?

Some of the links on this site are affiliate links.

During times of uncertainty, boring investments are often the most appealing.

Due to the record high valuations in the stock market, cryptocurrencies running up and real estate prices surging, investors are looking to diversify. 

Two durable, time tested assets to consider are farmland and gold. Both of these have been a store of value for investors for many centuries.

According to Only Gold, investors have been using gold and other precious metals as a store of value since 3100 BC. 

Land, on the other hand, has had value in society for even longer. Wars have been fought over it. Albeit, not likely farmland, but nonetheless.

Both of these assets fall under the category of alternative investments, something experts now say should take up as much as 15% of your portfolio.

In most cases, it probably makes sense to invest in both. However, we will be highlighting some of the similarities and differences between gold and farmland.

Similarities Between Gold And Farmland

  • Both gold and farmland have held value for thousands of years 
  • There is a fixed supply of both, you can't make any more gold and you certainly can't make more land
  • You can borrow against both of these assets
  • Both have historically been an effective hedge against inflation, however farmland has done a better job in recent decades

Differences Between Gold And Farmland

  • Gold is significantly more volatile than farmland, whereas farmland is significantly less volatile than the stock market
  • Farmland has provided investors with positive returns every single year for over two decades, meanwhile gold has gone up and down
  • Gold investors can only earn money through asset appreciation
  • Farmland investors can derive money from asset appreciation, renting out the farmland and potentially earning a cut of the crop
  • You are able to grow things on farmland, build structures on it and even live on it, none of which you can do with gold
  • By making improvements to the land, you can force appreciation
  • You cannot force appreciation with gold, it is a commodity with a set price that changes all the time
  • Global supplies of gold have increased by about 1% annually, whereas the supply of farmland is decreasing due to urban sprawl and other factors
  • Gold is more liquid than farmland, meaning it is easier to convert it into cash
  • Gold is easily divisible, whereas subdividing farmland is a more complicated process

Conclusion

Diversifying into alternative investments is something many investors are considering today. There are numerous different ways to invest in gold as well as farmland.

At the end of the day, both have historically been an effective hedge against inflation.

However, gold has done this with some years returning negative yields.

Farmland has had positive returns every single year for over two decades.

In terms of the usefulness of the investment, you can do more with land. However, you can put your gold coins in your pocket and bug out if need be. You can't do that with land.

In most cases, it probably makes sense to have both in your overall investment portfolio.

Looking to invest

in Farmland?

FREE

Download free guide with advice for beginners.

Scroll to Top