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Investors looking for consistent returns will often find their way over to the investment category of Timberland.
Instead of the ups and downs of the stock market, this can be a boring but consistent investment. But what is the return potential?
The average return on timberland investment can vary based on various factors such as location, timber markets, management practices, holding period, and overall market conditions.
In addition, timberland investments are typically considered long-term investments, often spanning several decades. That means you often need to hold onto it for many years to see the average return.
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According to a nuveen report on Investing in Timberland, here are the average historical returns for timberland.
From 1992 to 2020, Timberland returned an average annualized return of 9.26% over a 28 year period.
This was compared to a:
- 11.16% Return from US Stocks
- 7.49% Return from Foreign Stocks
While the US stock market did outperform the performance of timberland, consider the volatility.
This timberland return was generated without the wild ups and downs of the stock market, such as the Great Recession of 2008 – where most investors lost 50% of their stock portfolio value.
It's important to consider that timberland returns are composed of two main components: biological growth and timber price appreciation.
Biological growth refers to the increase in timber volume as trees grow over time, while timber price appreciation refers to the change in the market value of timber products.
As with any investment, past performance does not guarantee future results, and it's essential to conduct thorough research before making any investment decisions.