When it comes to non-traditional or alternative investment options, one of the most successful options is agricultural land (arable land). The annual return in the agricultural sector has historically outperformed traditional asset classes such as the S&P 500, Nasdaq, Gold, Real Estate Investment Trusts, and Timber.
AcreTrader is one of the platforms that allows you to invest in agricultural commodities, including acres of farmland.
In our AcreTrader review, we talk about how this is a way to hold farmland directly, but we don’t talk about the benefits of investing in farmland.
If you are thinking of trying out the platform and becoming a farmland investor, here are some of the reasons why farmland is a good addition to your investment portfolio.
1. Hedge against inflation
Inflation is the bane of any investor. It is the gradual erosion of consumers’ purchasing power and the slow depreciation of the US dollar. Normally, the Fed would look to keep the average inflation rate at 2% per year, but in recent years, we’ve seen a very low inflationary environment.
To give you an idea of how inflation works, it should be An acre of farmland cost $90 in 1900While agricultural land prices rose in 2000 to $1,050. This is how inflation works and how it will continue to work.
Farmland has proven to be very resilient to all kinds of economic conditions, including inflation, just like gold. This is due to the fact that when inflation rises the value of agricultural land also increases.
2. True diversity in your portfolio
At Modest Money, we firmly believe in the power of a diversified portfolio. You need to build a portfolio that can withstand all market conditions in order to generate stable returns.
Farmland with AcreTrader is particularly valuable because it correlates negatively with common investments such as stocks, bonds, mutual funds, and exchange-traded funds (ETFs).
Furthermore, because farmland produces food and operates in a different market than other forms of real estate, it is only slightly associated with residential and commercial real estate investments.
When markets are down, yields on farmland are at their highest, adding quite a bit of value to anyone’s portfolio.
3. Equity rights and opportunities to earn profits
AcreTrader pays investors in two ways. First, there is the potential for farmland itself to grow in value. Increased growth in the stocks you own means that the value of your investment may rise in the coming years.
But even if they don’t grow in the near future, these farms are leased to real people who will proceed to work the land, including permanent crops and annual row crops. For the privilege of being able to cultivate, they pay an annual rent. This is your earnings, which means you get paid out every year regardless.
Dividends can be taken and used as income or they can be reinvested so you can increase your stock holdings.
Investing in AcreTrader offers two ways to earn with minimal management. You do not need to know anything about farming to make this type of investment.
4. Add stability to your portfolio
Every investor wants to achieve those strong returns. But every investor needs stability in their assets. Without stability, your money is at risk with each passing day. Speculative land purchases, cash stocks, and cryptocurrencies are investments that can bring great returns but can also collapse at any time.
Investing in farmland is a stable asset because it not only hedges against inflation, it also hedges against volatility.
The reason farmland offers such flexibility is that there is always a demand for all different types of farmland, including organic farmland. Without farms, there is no food production, permanent crops, or annual crops, so there is always economic demand.
In fact, between now and 2050, The global demand for crops will increase by 110%, According to one study. It makes sense that as the population increases, so does the demand for food.
This type of market demand is why agricultural real estate is not associated with other forms of real estate.
5. The power of scarcity
AcreTrader includes only a limited number of potential investment opportunities because available agricultural land is scarce. Gold is a popular investment because it is a finite resource, and the same is true for farmland.
As the population grows and the demand for food increases, there will be a greater need for agricultural land. Only 17% of the country’s land is devoted to agriculture, but agriculture provides it 992 billion dollars for the US economy every year.
We highly recommend that you consider investing in agricultural land because it has everything you need to succeed:
- the demand
- historical performance
- positive returns
- Inflation resistance
It is rare for any investment to have all of these attributes. In addition, with potential dividends via cash income and general market capitalization increase, this is a solid investment tool.
Invest in agricultural land
Only since 2012 have ordinary Americans accessed farmland investment opportunities through marketplaces. Previously, the agriculture sector was a protected investment asset class reserved for major wealth funds, institutional investors, and other classes of high-profile investors. The only way for ordinary people to invest in agricultural industries was to buy a farm and work the land themselves.
Thanks to companies like AceTrader, farmland ownership has never been easier or more attainable for the average investor. Our AcreTrader review is very positive because it is one of the few ways the average investor should add this investment class to their portfolios.
If you want to learn more about AcreTrader or create an account, click on this link.
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