Alternative Investments are Good for your Portfolio
Interest among international investors in investing in farmland as an alternative investment is growing. This is due to the asset class’ solid fundamentals, risk-adjusted returns, low correlations with volatile stocks, and inflation resilience. Our company, Agro Invest Spain, was founded on the premise that agricultural investments in Spain and almond investments can increase investors’ risk-adjusted returns. Even though we are more confident than ever in this assertion, given the current global climate, it would be helpful to outline some advantages of including tangible assets, such as our agricultural land for sale in Spain, and alternative investments in clients’ portfolios.
What are Alternative Investments?
Investments in financial assets other than bonds, equities, cash, and fixed-income instruments are known as alternative investments. Simply put, they don’t fit within the conventional asset categories. As a result, the term “alternative investment” may conjure images of investments only available to substantial institutional investors. This is a widespread notion that, until recently, might have had some basis in reality. However, a wider audience now has access to this category of investments because of recent regulatory developments, and the advantages are much more significant than you might anticipate. Alternative investments include commodities like precious metals, oil and gas, venture capital, real estate, cryptocurrency, and, more recently, farmland.
The two types of alternative assets are “return enhancers” and “return diversifiers,” respectively:
- An asset added to a portfolio hoping for a greater average return is referred to as a return enhancer.
- An asset is introduced to a portfolio to lower risk across the entire portfolio because of its low correlation to other assets. This asset is known as a return diversifier.
Distinguish between private and public.
What are the benefits of Alternative Investments?
When building their portfolios, investors choose investments based on how well they make money and how much risk they involve. Therefore, alternative assets are viewed favorably due to their potential for significant returns and the chance they present to diversify an investment portfolio away from conventional investments, which subsequently lowers total portfolio risk. Let’s get more into a few of these ideas:
Historically, the financial gains provided by alternative investments have attracted investors. Alternative assets have the potential to generate substantially larger returns than their conventional counterparts. The caveat: capital is usually locked up for considerably longer periods with alternative investments.
When an investment is uncorrelated with the stock market in the way that managed farmland is, it does not fluctuate in response to market fluctuations and changes. Many investors mistakenly believe that holding REITS or other publicly traded alternatives will diversify their portfolios, only to discover that they are equally volatile and add little to the value of an investment portfolio.
And for this reason, we draw a crucial contrast between public and private alternative asset options. Private alternatives have become popular among investors to diversify their portfolios and hedge against volatility. They will have a wall of protection in place and not negatively impact their entire investment portfolio if the stock market declines drastically. Even in a healthy economy, the stock market is notoriously unstable, and private alternative investments are mostly insulated from the erratic fluctuations in the public markets.
Consider an agricultural investment with Agro Invest Spain. You buy farmland in Spain with full ownership of the title deed. Even when the economy is doing well, the stock market is known for being unstable, and private investments are usually not affected by the changes in the public markets.
In a conventional public investment, the share price is typically unrelated to an actual asset. It depends on several variables that are outside of a company’s success. You escape the volatility of public investments since shares of private investments are not publicly traded. Additionally, your investment is frequently supported by a tangible asset, such as managed farmland.
Why is Farmland a Good Alternative Investment?
Agricultural investments often fall into the category of “alternative assets,” but managed farmland is a separate asset class even in this category. Farmland investments can provide similar inflation-hedging benefits to commodities in your portfolio. However, it also offers additional value generation through typical real estate or private equity practices like active management and infrastructure expansion. Additionally, the agricultural property provides a reliable source of cash flow annually through the sale of crops. Furthermore, managed farmland assets appear likely to increase in value in the coming years, given the limited availability of global agricultural land and the rising demand for food.
We can look at the historical data to get some perspective on the reliability and strength of farmland investments. According to the USDA, farmland has generated an average yearly return of 11.5% since 1991, making a profit each year. Except for the Dow Jones REIT Index, it has outperformed all other asset classes throughout that period, to put that return into context.
Alternative Investment with Agro Invest Spain
Are you trying to diversify your investment portfolio to include alternative assets with long-term capital development driven by the income-generating ability of the asset, supported by the basic principle of supply and demand? In that case, alternative investments in managed farmland may be all you need. At Agro Invest Spain, we set out to make investing in farmland accessible, transparent, and straightforward. We want to make it easier for investors to access this unique asset class and make it easier for them to invest in agriculture. So, if you are keen to add an agricultural investment in Spain to your portfolio, contact our team of expert consultants to start your almond investment journey today.
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.