The habit of turning to farmland investing for solace has spread worldwide, especially among the wealthy. According to The Land Report website, Bill Gates now holds the record for owning more than 100,000 hectares of farmland in the United States. Rural assets have been on investors’ radars for the past 15 years, and the number of funds investing in the purchase of agricultural land has increased 15-fold globally. So something significant must draw the wealthy and successful to invest in farmland.
But how can we categorize the asset and investment type of farmland? Agricultural land actually falls into several asset class categories, each with positive connotations for an investment portfolio. So, let’s explore these asset class categories, in turn, to see what positive attributes they offer to investors and how farmland investing reflects in each one.
#1. Income producing assets
Investments that provide a continuous flow of income in the form of dividends, interest, rent, or other dependable cash flow are known as income-producing assets. Some investors concentrate on income-producing asset categories for a portion of their portfolios, while others do so for their entire holdings. Investors typically prefer income-producing assets because they can offer a steady reward, even a small one, with less risk and volatility.
Farmland is one income-producing asset class that can offer the chance to invest in a tangible asset that adds actual value to your portfolio. Even better, farmland can create passive income depending on performance and how your investment is set up. For example, with the almond plantation model at Agro Invest Spain, you earn annual revenue from selling your almond crops. As a result, you can make a consistent income while holding onto your valuable asset in our managed farmland offering when you invest in farmland via Agro Invest Spain.
#2. Appreciating assets
The goal for most assets is appreciation: they should be worth more when you want to sell them than when you first got them. Although various investments can appreciate in value, many investors focus on the potential for appreciation rather than regular income to develop more significant returns over time. Because of this, holding periods for appreciating assets tend to be longer.
The appreciation rate must exceed the inflation rate for an asset to be deemed to be appreciating; otherwise, the asset depreciates. However, only after the asset is sold do any changes—positive or negative—return to the investor.
Farmland is one of the best long-term appreciating assets, despite many investment options having historically increased in value. Moreover, it is superior to other long-term investments since it can also help generate short-term money, which is even better.
A unique investment in terms of capital growth and the general health of your portfolio, agriculture offers numerous opportunities to build value. The first is the continual, long-term increase in the value of available agricultural land. Over the last ten years, farmland prices have grown dramatically and are still rising. As a result, you can anticipate seeing a good return on your investment in agribusiness. Additionally, based on your chosen investment strategy, you can supplement your primary income by renting out your acreage or selling your seasonal crops. Therefore, the farmland asset class is particular because acquiring a rising asset gives you immediate access to revenue from high-demand goods like food.
#3. Safe Haven Assets
Safe haven investments sustain or rise in value, while most assets lose value and can be characterized as a diversifying and risk-reducing asset class category. Therefore, when times are tough, some investors look for safe-haven assets that are uncorrelated with or negatively correlated with the general market, even though such systemic market shocks are unavoidable.
Diversifying an investor’s portfolio with safe-haven assets is advantageous in an unstable market. When the market rises or falls, it typically does so for a brief period. However, there are times when the market drop lasts long, such as during a recession. During times of market turbulence, the market value of the majority of investments sharply declines.
Patterns immune to economic cycles promote demand for agricultural investment opportunities, shielding it from the performance of the financial markets and rising due to rising consumption or population growth. In addition, due to its scarcity and importance for existence, agricultural real estate is quickly becoming a favorite among astute investors. These factors are pushing farmland values to record highs.
#4. Real Assets
Real assets endure for a long time and fall into the tangible asset class category, and are typically more resilient to market swings than different types of assets. A piece of farmland, for instance, keeps its worth as long as there is a market for it. A great deal of value is attached to this land if it happens to be in a fertile and highly productive area like Spain.
As the market remains uncertain, direct investments in tangible assets, such as farmland, make more financial sense from an investing standpoint. In contrast to purchasing shares of a company that is getting much media attention or utilizing more complex strategies like derivatives, you can see, touch, and smell farmland. In addition, farmland is a much more reliable and difficult-to-steal store of value than even gold. Farmland also offers inflation protection and has less volatility than stocks. Finally, compared to an individual stock or bond, farmland is less likely to “go to zero” due to its asymmetric risk profile.
Diversify with the Ultimate Asset Class at Agro Invest Spain
We can see that farmland investing is an asset class that fits neatly into many desirable investment categories. The time to look at investment offerings from Agro Invest Spain to make sure your portfolio is diversified is now. Without needing to become an industry specialist, Agro Invest Spain enables you to gain access to the portfolio-enhancing advantages of farmland investing. All you have to do to get going is contact us, and we’ll match you up with a team member who can assist you in achieving your investment objectives.
All rights of this content prepared by Api Group Agro Inversiones SL (“API Group”) belong to API Group. These rights are protected and the partial or complete copying, reproduction, distribution, processing or use of the content in any way without permission and without reference will result in legal and criminal liability of individuals.