Gold and farmland are two of the world’s oldest and most valuable asset classes, and they share many similarities that investors find appealing even today. Surprisingly, investment in farmland has mostly gone unnoticed in modern times. Taking a closer look, on the other hand, could literally pay dividends, as farmland has traditionally surpassed gold investments in almost every manner.
We feel that investing in farmland can be more appealing than gold for the following reasons, which have historically remained true:
Strategy to diversify your portfolio away from financial markets ravaged by global debt concerns.
Gold has been mentioned as an option, but farmland may be a better long-term bet. In contrast to precious metals, they can be rented out and used to cultivate crops or feed cattle. Over the past two decades, farmland has proven itself a strong adversary to the ever-growing gold market in India. With lower volatility and higher returns over the past few decades, farmland may just be replacing gold in many investors’ portfolios.
Protect Yourself Against Inflation
To be fair, gold investments are more about the “return of your money” than the “return of your money.” Concerns about currency inflation and deficit spending were among the primary reasons people invested in gold, particularly during the recent recession. Because gold has global market demand, its value is not tied to any specific currency. As a result, as the value of the US dollar falls, the relative worth of each ounce of gold rises.
Inflation raises food costs and commodity futures, which raises the cash rent rates that farmers can and will pay landlords. Increasing cash rents usually leads to an increase in land value.
While gold has historically been a good inflation hedge, farmland values have historically tracked inflation far more closely, with a 70% connection with the Consumer Price Index (CPI) and a 79.84% correlation with the Producer Price Index (PPI) (PPI).
No other asset class tracks this close to these two main measures of inflation. For this reason, farmland has offered consistent historical returns while proving to be a more effective hedge against inflation.
Biofuels are pushing agricultural demand to unprecedented heights.
Almost every oil-consuming country has set biofuel targets that will be implemented during the next five years. These countries include the United States, the European Union, Canada, Japan, Brazil, India, and China. To reach their ambitions, we will need to dedicate over 240 million acres to biofuel production. As you can see, the biofuel mania increases demand for farmland. There are also additional pressures to consider.
Limited in supply
Farmland is limited in supply and may become even more scarce as a result of global warming, desertification, and development. And, as the world’s population grows, more arable land will be required.
WHY CHOOSE FARMLAND OVER GOLD OR SILVER?
Farmland is also a useful inflation hedge because its value rises in tandem with inflation. However, an asset like farmland offers several additional possible sources of profit.
Aside from inflation, farmland can appreciate in value for a variety of causes. The value of farmland increases as the price of crops cultivated on it rises. When farmers can raise the productivity of their land, its value rises. Most crucially, land investors receive income (rent or mortgage income) in addition to capital appreciation over time. Farmland, unlike gold, generates cash income as investors hold it in the form of crops or rent: stronger seasons mean better returns for investors. This value varies, but it provides another layer of profitability to a farming investment.
Farmland in India is in short supply, and it is actually declining significantly each year. Farmland is critical. In this regard, many investors believe that farmland will outperform gold in terms of its potential to stay up with inflation over the next few decades.
How do I invest?
Moggs Estates is your answer.
Mogg’s estate gives you the chance to invest in Farmland and own a piece of agricultural land without the dreadful paperwork, plantation, maintenance, and everything in between. We manage all the technical processes so you can grow your wealth while living worry-free and reap the benefits of owning beautiful farmland. While we maintain your land, you can always keep an eye on all the activities with just your fingertips. For a better income, healthier environment, and a worthwhile investment, schedule a visit today!