In the past few decades, timberland investing has taken on a very different characteristic. Lumber and milling companies have sold off vast portions of their timberland holdings in order to focus on the production of timber products. At the same time, large groups of investors and investment companies have joined together to own vast tracts of forest lands. This allows for diversification and insulation from a market that is at once relatively stable and subject to unpredictable volatility.

Diseases in forests can create sharp fluctuations in timber prices and production. Wildfires also have an impact on the timber industry for obvious reasons. These are two of many reasons diversification in a timber portfolio is important. By investing in timberland properties in several of the major domestic timber production zones (namely the Pacific Northwest, the Northeast, and the South), you create a hedge against such disruptions.

Individual investors can choose to purchase their own tracts of land if they have the financial resources and the desire to do so. The trend, however, has been towards timberland investment management organizations (TIMOs). Think of TIMOs like mutual fund companies. Their strength lies in diversity and close attention to the parameters on the ground. Timberland investments should be watched with more care than investments like bonds and mutual funds.

Changes in Timberland Management

Forest management has changed considerably over the last few decades. Environmental and conservation considerations have led to regulation and changes in business practices that are aimed at preserving the long-term productivity of forest lands. Timberland investments are a separate class of investments from stocks, bonds, bullion, or real estate and require a different investment strategy. Speak about your goals with someone who knows the market before making your initial investment decisions.