Timberland Investment

AAA

DEFINITION of 'Timberland Investment'

An investment instrument used primarily by large institutional investors (such as public and private pension funds). The two main assets that underlie timberland investments are tree farms and managed natural forests. The returns on these forestland investments come from biological growth, upward product class movement, timber price appreciation and land price appreciation.

INVESTOPEDIA EXPLAINS 'Timberland Investment'

The benefits of timberland investments arise from the tendency for the investments to be negatively correlated with other investment instruments such as stocks and bonds. This negative correlation allows timberlands to be used to diversify a portfolio. Timberland investments also provide relatively high returns for the low risk they carry.

However, timberland investments are not perfect investments; they are still open to risks such as high purchase prices that can depress returns, natural disasters that can destroy the forestland underlying the investment and price risks associated with the price of the trees on the land.

RELATED TERMS
  1. Paper Industry ETF

    An exchange-traded fund that invests primarily in manufacturers ...
  2. Diversification

    A risk management technique that mixes a wide variety of investments ...
  3. Pension Fund

    A fund established by an employer to facilitate and organize ...
  4. Timber Investment Management Organization ...

    A management group that aids institutional investors in managing ...
  5. Correlation

    In the world of finance, a statistical measure of how two securities ...
  6. Hedge

    Making an investment to reduce the risk of adverse price movements ...
Related Articles
  1. 5 Tips For Diversifying Your Portfolio
    Investing Basics

    5 Tips For Diversifying Your Portfolio

  2. The Importance Of Diversification
    Bonds & Fixed Income

    The Importance Of Diversification

  3. Timber Investments Cut Down Portfolio ...
    Options & Futures

    Timber Investments Cut Down Portfolio ...

  4. If the stock market is so volatile, ...
    Investing

    If the stock market is so volatile, ...

comments powered by Disqus
Hot Definitions
  1. Halloween Massacre

    Canada's decision to tax all income trusts domiciled in Canada. In October 2006, Canada's minister of finance, Jim Flaherty, ...
  2. Zombies

    Companies that continue to operate even though they are insolvent or near bankruptcy. Zombies often become casualties to ...
  3. Witching Hour

    The last hour of stock trading between 3pm (when the bond market closes) and 4pm EST. Witching hour is typically controlled ...
  4. October Effect

    The theory that stocks tend to decline during the month of October. The October effect is considered mainly to be a psychological ...
  5. Repurchase Agreement - Repo

    A form of short-term borrowing for dealers in government securities.
  6. Correlation

    In the world of finance, a statistical measure of how two securities move in relation to each other. Correlations are used ...
Trading Center