A Commodity ETF Growing Like a Weed
After years of slow growth, timber is back as an attractive long-term investment, and this exchange traded fund is a great way to get involved, writes Nick Vardy of The Alpha Investor Letter.
Timber is a longtime favorite of some of the top investors in the world. Value investing legend Jeremy Grantham believes that timberland is the single best long-term investment. And last year, the Harvard Endowment Fund had about a 10% weighting in timber, then increased its weighting for the coming year.
The best way to invest in timber is through the S&P Global Timber & Forestry Index Fund (WOOD), an exchange traded fund.
Taking a long-term view as they do, it is easy to see why Grantham and Harvard are so enthusiastic about timber. After all, trees grow through bear markets. Trees grow through bull markets. Trees simply grow through everything.
The price of timber has grown at a remarkably consistent rate throughout the years, increasing in price by an average of 6% every year for the past century, including during two World Wars, the rise and fall of the Soviet Union, and 9/11.
Between 1971 and 2010, timber boasted average annual returns of over 14%. In 2008, while the S&P 500 fell 38%, the value of timberland rose 9.5%. If there is a way for you to protect yourself against a crash in financial markets, timber is it.
Timber offers higher returns than the overall stock market.