Is the forest familiar as an investment? If not, then the point is. Few investments bring money, food, heat and act as a carbon sink and home to many creatures in the same way
I love investing and the forest. Prospective investors avocation studied and made a living for about six years now, the forests while I rumble the entire navigation hobby in my life Scouting and the endless spin around. The strange thing is that the combination of these, i.e. investing in the forest, still shines in my life in its absence!
I dreamed of actively hunting on their own now for about five years, and been tried to find forest holdings alone and with others. Sometimes for fun and general education, sometimes again for serious shopping pants on foot.
I am normally all for me now immediately -human who buys too easily, and on a whim. This time, however, I wanted to – maybe too much – it is the first state to be The One. It is certainly the biggest reason why I have already indulged himself acquisition of my own space for so long.
Of course, this is also explained by the fact that if you have 500 euros in your account, it is easy to put it on the stock exchange without thinking too much. Prices of roughly ten tonnes of forest holdings, on the other hand, severely curb the student’s purchase intentions. For once, when I knocked down the forest farm, I just said “I want this”, even though the account didn’t have one hundred and fifty thousand euros, which the farm paid for.
Of course, a loan can be granted for the purchase of a forest and, just like in other properties, the forest can also serve as collateral for the loan. Contact the lender for more information on collateral and interest.
What fascinates you about the forest as an investment?
The forest is very important to me in many ways. I am also sketching this blog post in the woods. The forest is growing, even though the pandemic is raging, stock markets are collapsing and world conflicts are heating up.
While I love money and feel it makes life easier and increases freedom, I would say that 30 percent of your first forest purchase is money and the rest is recreational use, security, feeling, nurturing diversity, and the feeling that there is a completely different place to escape if the world collapses around. . It is also important that in the forest I own, in addition to myself, animals, plants and also those endangered species that do not receive column space from the media because of their sweetness also thrive.
Few investments bring money, food, heat and act as a carbon sink and home to many creatures. As an owner, I can contribute to the management of my forest and thus to the preservation of diversity.
I am in many respects quite stereotypical vegan, but the forest industry sector is its diversity close to my heart. The forest industry is a subject of eternal wonder for me, both good and bad. Innovations are astonishing and strange logging decisions are annoying. But, as in many other areas, the forest industry has made strides in terms of responsibility. I believe and hope that in the future, the forest industry will be one of the forces slowing down climate change.
My interest in the forest for both recreational and economic use took me to study for a bachelor’s degree in forestry in addition to my studies in finance and economics.
Why buy a forest?
At first, it may seem that investing in the forest is laborious and requires a lot of russeting in the forest, but depending on the management measures, it may take years or even decades for the plot to do nothing but enjoy the forest ownership.
Planting and seedling care is an easy thing to learn, which, especially in good weather, is, at least in my opinion, a nice thing to do. Gets a sweat on the surface, can enjoy the open air, and quickly sees the imprint of his hands. And if you are not interested in forestry work, you can easily outsource it to professionals.
Forest ownership is suitable for people who do not need the steep roller coaster of the stock market at times. Slow but more predictable and stable growth of the forest in the stock market may seem like a safe alternative. The forest is also suitable for balancing a sudden stock portfolio.
Where, for example, investing in cryptocurrencies has been a fairly round-the-clock rally so far, where you have been able to enjoy the ups and downs of a tube of hair, investing in the forest is not suitable for emergency trousers. Namely, if you buy a seedling in your thirties, quite a few will be able to enjoy the proceeds of regeneration feeling. The rotation time of the forest is 70-120 years, depending on the location and soil. However, the forest also gives a return even before the actual “main harvest” and thinnings are paid for even before the forest renewal age.
How is the forest procured? Four ways:
Buy your forest farm
This is my favorite option but requires the most work. The good thing about owning a forest directly is that you can directly influence the management of the forest and know exactly what and when is happening on the farm. And the proceeds of the forest come to you!
With the smallest capital, you can become a forest investor by investing in forest funds. These are provided by banks and brokerages, among others. The funds have good diversification and are an easy choice, but you should pay special attention to expenses.
Buying a forest and connecting it to a shared forest is, in my opinion, an excellent option for a person who wants to own a forest but does not have the time, skills, or desire to take care of the forest itself.
In joint forest placement, the own forest plot is integrated into the joint forest, the management of which takes care of the plot following the Joint Forest Act and sustainable forestry. In shared forests, the return is more even, as the shareholder can enjoy the income of the forest plots connected to the joint forest by other joint forest shareholders.
For many, forest space is passed on as a legacy. The new owner may be completely obscured by what should be done with it. Connecting the space to a common forest is a very good option in such a case.
If you are excited, there is an alternative to going to a forest owner course, which is organized by, for example, the Forest Center and vocational schools. If you learn to take care of yourself, the future yield of the forest can be greatly affected!
What returns does the forest provide and how can it be affected?
The long-term investment return on wood production has been 4-5 percent.
The return is achieved by carrying out the management measures yourself, selecting the tree species for the planting according to the soil, and carrying out the management measures in a timely and high-quality manner.
Even if you think that the forest only grows on its own as it grows and is taken over by the lord, the forest owner can have a lot of influence on how the forest develops. By examining age drilling, you can easily see at what stage thinning has been done and the tree has been given more space to grow. Management measures are hugely important and a forest management plan is good to have.
The costs of forest management are on average 15-25% of the income from the forest rotation period, so if you have the time, know-how, and desire to work on the plot yourself, the return is much higher than outsourced activities. However, the most important thing for the return is that the nursing work will be done at the right time – such as as a purchasing service.
Planting and early germination are easy to do yourself. Thinning and final felling, when the tree is already large, requires more robust equipment and a forest machine driver than a clearing saw. It is usually worthwhile to manage the forest trade as a vertical trade, ie to sell only the area to be felled from your forest holding to the buyer. The buyer takes care of the rest.
Forest returns are below the stock market’s long-term return of 7%, but where the stock market saws the forest several times over the 70-120-year cycle, well-diversified forest ownership only bursts to the northeast and returns fluctuate less than the stock market.
Depending on the location, it takes 25-40 years from the planting of the seedling to the first thinnings for which money can be obtained, ie the first decades the forest produces negatively.
So far I have spoken of “traditional forest management” which is planted after the reform, cleared, thinned and terminal beaten.
It is also possible to engage in continuous forest cultivation, which I, as a forest owner, would be particularly interested in. The method is not suitable for every place, but if successful, it will be more cost-effective, easier to maintain and the forest will yield more often. Continuous cultivation requires an eye from the forest machine operator, but as a forest owner, I would ask a professional about the suitability of my forest plot for continuous cultivation.
What counts the return?
Many things affect returns. The largest is the geographical location of the farm and the type of habitat.
It is therefore not advisable to buy forest space by comparing the number of hectares with the price, as fiber and wasteland are cheap, but they have little to give the forest owner other than recreational and natural values. Without underestimating them at all. Personally, when I dream of my swamp, even though its monetary value is hardly anything.
While my favorite saying is “the forest grows despite the management measures,” the management measures should not be neglected. Seedling care arrears and deforestation will affect yields for decades to come.
In the thinning phase, the professional skills of the forest machine operator also play a major role in how the forest starts to develop again after thinning. A bad factor can wreak a lot of havoc, as logs are about three times more valuable than pulp fiber. If a driver chops a lot of fiber from a good log, the real return of the forest owner will be much lower than calculated.
The forest machine operator is a kind of asset manager, and as with the management of listed assets, it is worth choosing the asset manager of the forest assets carefully.
Is the forest a risk-free investment?
Although the forest lacks the sharp fluctuations typical of the stock market and the curve is more evenly distributed to the northeast, forest investment is not a risk-free investment either.
In the event of a bad winter, snow damage can make a large notch in the yield curve, pest insects can at worst destroy the entire area, and poor management of the seedling stage, in particular, affects yields throughout the cycle. Storms, forest fires and animal devastation can also eat in the long run.
But as with any investment, diversification reduces risk. In the stock market, it is worth diversifying geographically and the same is true for forest investment. If the storm strikes Central Finland, the forests of North Karelia may still be safe. Time diversification, which is familiar from the stock market, also reduces risk. Temporal decentralization and a kind of “industry decentralization” can also be done within one forest. If a forest has trees of many ages and several tree species, it is better protected from destruction than a uniform forest of one tree species.
Hiring professionals also reduces the risk if you feel that your skills are not enough.
Insurances are also sold to forests, which the forest owner should check out.
Where to go to look for information?
If you are interested in the forest as an investment destination, it is worth starting to get acquainted by ordering notifications about, for example, forest holdings for sale in the area of interest by e-mail. Even if the purchase of your forest is not still relevant, you can get notifications by browsing for an accumulated future to find out what kind of premises are for sale and in what price categories they are rotating.
The demonstrations of the farms show how the type of habitat, location of the farm, growth categories, forest management status, road connections, and proximity to water bodies affect the price.
If you are not in a hurry to sell wood for money but plan to leave the forest as a legacy, for example, you can get seedlings very cheaply and by caring for yourself until retirement, you can leave a succulent inheritance and a huge increase in value. When buying a reform-mature forest, the price is more expensive and the income will be credited fairly quickly if the forest decides to cut down. These have no potential to increase the value of the space in the same way. In forest holdings, most of the price is made up of wood, the price of land is relatively affordable. Final felled, unplanted land can be obtained very cheaply, but the law obliges the forest owner to plant new forest within the time limit.
I would buy a young and grown-up growing forest and an opening or young seedling that is not planted as a hobby because forest management is a nice thing to do and when the forest is young you can have a huge impact on how the seedling develops into a forest.
Can I get forest from the stock exchange?
Well, yes and no. There are forest companies on the stock exchange that do own the forest and whose prices are affected by the price of wood and the forest industry. For example, UPM owns more than half a million hectares of forest in Finland, which means that as a UPM owner you are theoretically a forest owner. But it doesn’t feel at all like berry picking in your forest!
There are also forest ETFs, but they also have mainly forest-related companies, not the forest directly.