If you've never thought about investing in farmland before, it might be time...
It's one of the best-performing asset classes over the past few decades. Yet no on talks about it.
According to the U.S. Department of Agriculture, there are over 900 million acres of farmland in America. Most of that is owned by farmers and ranchers, and about one-third is owned by investors.
Historically, there have been two main reasons why investors want to own farmland...
The first is that the land appreciates in value. Over the past five decades, American farmland has increased in value by about 6% a year. And there were only five years during that period where farmland value decreased in value.
It's an incredibly sturdy investment.
The second reason is because you can lease your land out to farmers. They'll send you checks every month, and you'll earn a solid yield because of it. It's a hard asset like gold – but it's an income generator.
Since 1991, farmland has earned investors an average annual return of nearly 12% a year. That's an incredible return. Most investors would kill to make that much every year.
It beats almost every other class besides real estate investment trusts ("REITs"). The best part is, owning farmland is far less volatile than REITs...
Farmland also has a low correlation with other assets... meaning that it doesn't move in the same direction as things like stocks and bonds.
I've talked before about the importance of diversification for an investor. You have to own more than just stocks, bonds, and cash. The value of your farmland can go up even if stocks go down... and that makes it an important part of an investor's overall returns.
When you think about it, the goal of investing is to generate the highest return possible while taking on the least amount of risk. Look no further than farmland...
The only problem with owning farmland is that it's not the easiest thing to buy. There is a huge upfront cost...
The average cropland value in the U.S. was $4,100 per acre last year. So you'll need a lot of money if you want to buy enough land to lease it out to a farmer.
Plus, farmland is not the most liquid investment. You can't sell it on a whim like you can with stocks and bonds. It takes time, and it's a process.
For those reasons, farmland is often the forgotten choice for folks looking to make an alternative investment.
The most common alternative investment is gold.
I can give you the case for gold with two simple reasons...
First, gold is seen as a "hard currency." When people get nervous about the Federal Reserve printing money, they turn to gold for protection. Today, the money printer is working at full speed (and that's scaring me).
Second, gold is seen as a chaos hedge. If the coronavirus epidemic gets worse or if the economy crumbles, people will turn to gold as a store of value... as they have done for many hundreds of years.
The price of gold has seen an incredible run-up recently. Gold is now trading for just under $2,000 an ounce...
The case for gold to continue to rise over the next few years is strong. But we understand if you're a bit hesitant to put money into the precious metal after a ridiculous move up like this.
So if you're looking for an alternative investment but don't want to go through the hassle of buying farmland or buying gold when it's up 28% for the year... consider investing in cryptocurrencies.
Cryptocurrencies like bitcoin are the final frontier. Bitcoin is a reliable currency that has a fantastic store of value and is completely beyond the reach of governments. And that's what's most important about this alternative investment...
It's completely out of reach of the government. There's no way for them to manipulate it.
For a lot of folks that see all the craziness going on in the world today, owning bitcoin and other cryptos makes a lot of sense.
It's a moneymaker, too.
Since 2010, when we had robust enough data for bitcoin, there has never been a four-year holding period for bitcoin that it wasn't the best-performing asset in the world among major asset classes and stock markets. If you want to get specific, the average four-year holding period generated returns over 48,000%. Even if you had handpicked the single-worst data by bitcoin, the worst four-year holding period generated a return of 414%.
I get that bitcoin and cryptos might scare you off. But you should take some time to understand them as an alternative asset class... because every investor should have a portion of his or her portfolio in alternative investments.
My colleague Porter Stansberry recently spoke with our in-house cryptocurrency expert Eric Wade (who once sold the wallstreet.com domain name for more than $1 million).
Eric explains how bitcoin protects you from the government, how to know which cryptocurrencies to invest in, and why the crypto boom isn't over yet.
We're only sharing this video for a few more days, so make sure you watch it as soon as possible by clicking here.
What We're Reading...
- Money Explodes; Gold Glitters; The Recovery Slows.
- Something different: A gas explosion rocked a Northwest Baltimore neighborhood.
Here's to our health, wealth, and a great retirement,
Dr. David Eifrig and the Health & Wealth Bulletin Research Team
August 12, 2020