Real Estate IRA In Florida

Timberland investments must be approached and handled differently from other types of investments like securities, annuities, commodities, or other types of commercial real estate. Timberland is not subject to fluctuations within the financial markets but it is still subject to volatility of a different sort. Timberland properties can be devastated by disease and by wildfires that can decimate production for a period of time.

Despite such natural fluctuations in production, timberland is still considered an excellent tool for diversifying your portfolio. Even after the worst fire, the trees will grow back. In the mean time the prices for your timber may spike to adjust to the decreased supply possibly shielding you from disaster. No investment is 100 percent risk-free, but if you diversify your timberland holdings you can reduce your risk even further.

Domestic timberland is divided by region with the three largest being the Pacific Northwest, the Northeast, and the South. No forest fire or disease will affect all of the major regions at once, so if you spread your holdings out geographically you gain a hedge against disaster. Timberland investment management organizations (TIMOs) build this strategy into their operations. Think of investing in a TIMO like investing in a mutual fund (but with trees instead of stocks).

The Changing Face of Forest Management
In the last half of the 20th century, conservation and environmental concerns have reshaped ideas about forest management and sustainable levels of production. A healthy forest can guarantee long-term productivity and long-term profits, but short-term profit-taking (read clear-cutting) destroys a forest's ability to regenerate and will destroy a resource that could have paid dividends for centuries to come. Look into the management practices of any timberland property in which you are considering investing.

Written By Scott Janko, The National Association of Financial and Estate Planning (NAFEP)

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