AcreTrader is just one platform that enables ordinary Americans to hold agricultural assets as part of their portfolios.
In our AcreTrader review, we talked about how this is a way to hold farmland directly, but we didn’t talk about the benefits of investing in farmland.
Why should you invest with AcreTrader when you can buy residential or commercial real estate instead?
If you’re thinking about trying out the platform, we’ve detailed some of the reasons why this could be your next great investment.
1. Hedge Against Inflation
Inflation is the bane of any investor. It’s the gradual erosion of consumer buying power and the slow decrease in the value of the U.S. dollar. Normally, the Federal Reserve looks to peg inflation at an average of 2% per annum, but in recent years we have experienced an extremely low-inflationary environment.
To give you an idea of how inflation works in action. An acre of farmland in 1900 cost $90, whereas in 2000 it cost $1,050. This is how inflation works and how it will continue to work.
Agricultural land has demonstrated itself to be extremely resilient to inflation in the same way as gold, due to the fact when inflation rises so does the asking price.
2. True Diversity in Your Portfolio
At Modest Money, we are firm believers in the power of a diversified portfolio. You need to build a portfolio that’s capable of weathering all market conditions.
Agricultural land with AcreTrader is especially valuable because it negatively correlates with common investments like stocks, bonds, and exchange-traded funds (ETFs).
Furthermore, since farmland produces food and operates in a different market to other forms of real estate, it only slightly correlates with residential and commercial real estate investments.
When the markets are down is when farmland does well, which adds a huge amount of value to anybody’s portfolio.
3. Equity and Dividend Earning Opportunities
AcreTrader pays out to investors in two ways. Firstly, there’s the potential for the farmland itself to grow in value. Growth increases on the equity you hold mean that your investment could spike in value in the coming years.
But even if it doesn’t grow in the near future, these farms are rented out to real people who will proceed to work the land. For the privilege of being able to farm, they pay an annual rent. These are your dividends, which means you get a payout every year regardless.
Dividends can be taken out and used as income or they can be reinvested so you can increase your equity holdings.
AcreTrader investing offers two ways to earn with minimal management. You don’t need to know anything about farming to hold this type of investment.
4. Add Stability to Your Portfolio
Every investor would love to nail those big returns. But every investor needs stability in their assets. Without stability, your money is at risk with every passing day. Speculative land purchases, penny stocks, and cryptocurrency are investments that can yield big returns but may also crash at any point.
Farmland investing is a stable asset because not only does it hedge against inflation it hedges against volatility.
The reason why agricultural land offers such resilience is there’s always a demand for farmland. Without farms, there’s no food, so there’s always an economic demand.
In fact, between 2005 and 2050, global crop demand will increase by 110%, according to one study. It makes sense because as the population expands, the demand for food goes up.
This type of market demand is why agricultural real estate doesn’t correlate with other forms of real estate.
5. The Power of Scarcity
AcreTrader includes only a limited number of potential investment opportunities because available farmland is scarce. Gold is such a popular investment because it’s a finite resource, and the same goes for farmland.
As the population grows and the demand for food explodes, there’s going to be even more need for farmland. Just 17% of the country’s land is dedicated to farming, yet agriculture provides $992 billion to the U.S. economy every year.
We strongly recommend considering farmland as a viable investment because it has everything you need for success:
- Inflation resistant
It’s rare for any investment to have all three of these traits. Plus, with potential dividends via cash income and general market value increases, this is a solid investment.
The Bottom Line
It was only since 2012 that ordinary Americans gained access to investing in farmland via the markets. Previously, this was a protected investment class reserved for major wealth funds and other prestige categories of investors. The only way for normal people to invest was to buy a farm and work the land themselves.
With opportunity presents big potential profits. Our AcreTrader review is so positive because it’s one of the few avenues ordinary Americans have to add this investment class to their portfolios.
If you want to learn more about AcreTrader or create an account, click on this link.