Buying into timberland is a route to diversify away from financial markets trends, and a recent exchange traded fund (ETF) allows everyday investors to do so.
Previously, you needed millions of dollars to invest in timber, and only the big guys could do so. Claymore/Clear Global Timber Index (CUT) invests in stocks of companies with the world’s greatest exposure to timber.
Lewis Braham for BusinessWeek points out that it amps up the exposure by weighting the 27 stocks in the portfolio not only by market capitalization but by actual acres companies own.
This everyday version doesn’t quite give the massive diversification as the bigger players get, but Braham says it’s still not too bad. Around 40% of the time timber stocks zigged while the broader market zagged. Timber stocks are also affordable, with an expense ratio of 0.60%.
The value of timberland is relatively stable, so it works well in pension plans. If timber prices fall, tree farmers can simply delay harvesting their crop, during which time the tree’s value grows along with the tree.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Mr. Lydon serves as an independent trustee of certain mutual funds and ETFs that are managed by Guggenheim Investments; however, any opinions or forecasts expressed herein are solely those of Mr. Lydon and not those of Guggenheim Funds, Guggenheim Investments, Guggenheim Specialized Products, LLC or any of their affiliates. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.