Investors are always on the lookout for new opportunities promising better returns than standard stocks and bonds.
But while cryptocurrency and memestocks are currently dominating that discussion, the same qualities that make them so exciting and newsworthy should give you pause.
Take crypto: Incredible gains of up to 20 times in value are lost just as quickly. And even though digital currencies are supposed to be a medium of exchange, after more than a decade in circulation you’ll still struggle to buy a pizza with Bitcoin.
As billionaire investor Warren Buffett points out, cryptocurrencies “don’t reproduce, they can’t mail you a check, they can’t do anything, and what you hope is that somebody else comes along and pays you more money for them later on, but then that person’s got the problem.”
One economics professor recently commented that Bitcoin has less practical utility than tulips — and at least tulips don’t devastate the environment with energy-sucking mining operations.
If you’re looking for something more real — something that does generate income on a steady, reliable basis, something that’s useful to humanity — consider investing in farmland.
How do you invest in farmland?
Farmland produces something that every person on the planet needs: food. Its intrinsic value offers a lot of stability but also impressive growth potential.
“It’s a real asset, it’s tangible … it’s the oldest type of asset there is,” says David Perez, an investment associate at FarmTogether, an investment platform that allows qualified investors to purchase a stake in U.S. farmland without buying a whole farm.
The company pursues attractive properties, then partners with experienced local farmland operators who manage the land. The goal, FarmTogether says, is to give more investors a chance to buy into these attractive but previously hard-to-get assets.
The full-service platform provides the information you need to directly invest in specific properties. You can take a low-risk position and just get a cut of the lease, or you can explore revenue sharing, profit sharing or even the direct operation of a farm. Then, years down the line after the farm rises in value, you get a cut of the profits from the sale.
Another option is to invest in a farmland real estate investment trust (REIT). Farmland REITs buy farmland and lease it to the farmers who work the land.
Investing in a farmland REIT lets you hold interests in numerous farms across the country, for example, rather than purchasing a single farm in its entirety. It’s a way to take advantage of high returns without the hassle of actually owning or managing farmland.
What are the benefits?
As an investment, farmland offers a ton of advantages.
First and most importantly, it’s a proven source of higher returns than you get from more traditional portfolios. Between 1991 and 2019, U.S. farmland delivered more than 11% in returns to its investors, according to FarmTogether’s research.
That’s better than traditional real estate, better than bonds and gold — it’s even better than the stock market, which over the same period grew by 9.6%.
And whereas a traditional mix of stocks and bonds pays 8.15% in average annual returns, adding farmland to mix will jack that number up to 8.61%, FarmTogether says.
Farmland is also a shield against volatility; it’s hard to find something more stable than the literal ground underfoot. Given the constant ups and downs in the stock market, Perez says it’s good to have investments in assets that, while still subject to fluctuations, are “more insulated” from the turmoil.
Inflation? Farmland helps in that department, too. When consumer prices rise, the prices of commodities like food generally rise, too. That means the value of a portfolio with farmland is more likely to keep pace.
And of course, since farmland is genuinely useful and productive — not just some hypothetical store of value — you get to see the immediate benefits of that productivity. You can get a cut from both the leasing fees and crop sales, providing you with a cash income, while the value of the asset increases.
Getting back to the land
If you’re looking for something different to diversify your portfolio and boost your returns, remember that crypto’s value is theoretical while its impact on the environment is very real.
By investing in farmland through an easy-to-use app, you’re supporting rural communities and putting your money into one of the most humble yet vital human endeavors.
While no investment is a sure thing, you can guarantee that regardless of what the economy is doing, people will always need to eat.