Michael Zagari

Associate Portfolio Manager

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Investing in Farmland - A Stable Asset for a Diversified Portfolio

Farmland as an Investment

Farmland, often overlooked in the array of investment opportunities, is a tangible asset that provides a unique combination of stability, return potential, and diversification. It represents a key link in the global food supply chain, a resource that will always be in demand given the world’s growing population.

Lowering Overall Risks in Your Portfolio

Incorporating farmland into your investment portfolio can effectively lower overall risk for several reasons:

  1. Stability: Farmland values have historically shown less volatility compared to traditional assets like stocks or bonds. This stability can act as a buffer against more volatile investments in your portfolio.
  2. Inflation Hedge: As a real, physical asset, farmland often serves as an effective hedge against inflation. During inflationary periods, the price of commodities, including agricultural products, tend to rise, potentially leading to increased farmland values.
  3. Non-Correlated Asset: Farmland returns are generally non-correlated to traditional financial markets. This means farmland can provide positive returns even when stock or bond markets are underperforming, adding a layer of diversification to your portfolio.

Future Benefits of Farmland Investment

Investing in farmland isn’t just about risk mitigation. It also offers significant future benefits:

  1. Increasing Demand: With a rising global population and a finite amount of arable land, the demand for farmland and the food it produces is expected to grow, potentially leading to increased returns for farmland investors.
  2. Sustainability and Impact Investing: Responsible farmland management can contribute to sustainability goals, such as improved soil health, biodiversity, and carbon sequestration. Investing in sustainable farmland allows investors to generate returns while making a positive impact on the environment.
  3. Potential for Appreciation: In addition to annual income from crop production, farmland can also offer potential for long-term capital appreciation as land values increase over time.
  4. Technological Advancements: The integration of technology in farming, known as precision agriculture, is increasing the productivity and efficiency of farmland. These advancements can boost profitability, benefiting farmland investors.

Farmland investment offers a compelling mix of stability, growth potential, and diversification benefits. As the world continues to grapple with a growing population, climate change, and the need for sustainable food production, the value of farmland is poised to become more evident. It’s an investment opportunity that allows you to diversify your portfolio, hedge against inflation, and make a positive impact on the world.

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Disclaimer:

Nothing on the website shall be construed as an offer to buy or a solicitation of an offer to buy any services or products. Commissions, trailing commissions, management fees and expenses may be associated with investments. Products are not guaranteed, their values change frequently, and past performance may not be repeated. Mandeville Private Client Inc. is a member of the Investment Industry Regulatory Organization of Canada and a member of the Canadian Investor Protection Fund.

This publication contains the opinion of the writer. The information contained herein was obtained from sources believed to be reliable, but no representation or warranty, express or implied, is made by the writer, Mandeville, or any other person as to its accuracy, completeness, or correctness. This publication is not an offer to sell or a solicitation of an offer to buy any securities. The information in this publication is intended for informational purposes only and is not intended to constitute investment, financial, legal, tax or accounting advice.

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