Farmland As a Portfolio Diversification Item
After the financial crisis and subsequent recession, many investors began looking for options besides traditional stocks and bonds. Some turned to gold and silver, while others turned to land. Farmland has become a popular investment, with people buying it all over the country in order to diversify their portfolios. Choosing to buy farmland for sale in Florida is one way to broaden your investments.
The point of creating a diverse portfolio is not solely about protecting against losses or boosting capital gains, rather it focuses on finding a level of risk that works for the investor. In order to diversify, investors often spread their wealth across different types of investments, such as stocks, assets, bonds and commodities. This means that even if one type of investment is losing value, another could be gaining it. Participating in day-trading with frequently changing stocks can be high-risk, but balancing that with a steady asset, like farmland, minimizes the risk to your portfolio.
When balancing a portfolio, investors are looking to find investments that have a low correlation. Correlation refers to how often the returns on two investments move together, either up or down. A low correlation means the dependency between two investments is not great. Farmland exhibits a non-correlation with the stock and bond markets.
Farmland as an Investment
Based on the non-correlation of farmland and stocks, many investors are viewing farmland as a tool for diversifying their portfolios. They view farm land for sale in Florida as a strong investment because of the continued need for farms and what they produce. There are some macro supply/demand fundamentals pushing the constant need for farming. As the world’s population continues to increase, farmers will have to grow the world’s food supply. Along with what humans consume, an ever growing meat industry also relies on the products farms produce. Countries across the globe rely on U.S. farms to produce enough row crops to feed their meat supply. This increasing demand for produce makes a profit for the investor because the farms sell the food to the U.S. market and export it around the world.
Investors can take advantage of the growing farmland asset by purchasing Florida farmland for sale. Florida’s unique climate offer investors a chance to purchase farms across the state that produce different crops, like oranges and strawberries.