How Long-Term Investments Can Benefit You

In uncertain times, with markets usually volatile, it is tempting to make long-term investments and hope to ride out any economic storms.

There are advantages and disadvantages to all types of investment terms so what are the specific benefits of Long-Term investments.

The most obvious benefit of long-term investing is compounding. This is the effect of dividends or interest being reinvested to achieve sustained Capital Growth.

If investing on a regular basis, this equates to cost averaging. This means that you may purchase shares or units monthly for example and the cost of the units will differ short-term but as long as the overall investment increases long-term then any troughs or peaks are smoothed.

What about a lump sum long-term investment?

In this instance you are hoping that the investment increases over the long run to achieve capital growth or any income derived will outweigh capital depreciation. However, what if the investment actually grew over the long term, GUARANTEED.

If you think about it how many investments can you think of that physically grow and offers huge demand and markets.

For a long-term and stable investment, you couldn’t do much better than an investment in Timber. When other investments have been heading down hill, timber remains a solid investment opportunity for the savvy investor. If you look at the return on investment figures for the last forty years, timber comes out as a top performer when measured against many other asset classes.

So how does a forestry investment work?

Usually, an investor will commit a lump sum. This will purchase saplings, fund the land lease, pay commissions and forester/management fees. The saplings are planted and they start to grow. Initially, the saplings are worthless but as time passes the young trees start to gain in value. Weaker trees will be harvested for paper pulp to allow the stronger trees to become more established. Usually, this first harvest will happen within the first five years. The income the harvested trees return will be passed to the investor as an income payment. The remaining trees continue to grow and all the time they increase in value. Further harvests will take place until the investor is left with high value, strong mature trees.

Please allow me to take you through a scenario. For example, an investor initially purchased 600 saplings. After year 4, 300 trees are harvested (returning £5000 in income). After year 8 a further 105 trees are harvested (returning £15,000 in income). After year 10 a further 68 trees are harvested (returning £20,000 in income). To this point £40,000 had been returned in income.

For argument sake, lets me make the assumption that a mature Melina tree (Gmelina Arborea) is currently worth £250 each and over a 12 year cycle the price increased by 5% per annum, a mature Melina tree would be worth £453 approximately.

Therefore, 127 trees would remain after 12 years and harvested. Returns would be 127 X £453 = £57,531. On this basis the overall return would be £97,531 for an initial investment of… £18,000.

Now what if I was to inform you Gmelina has risen in value 2005-11 on average 17.83% per annum.

As a long-term investment option, various bodies predict strong growth for the timber industry and for the foreseeable future. In the UK alone we use 50% more natural resources per person than what nature can replenish. When you weigh-up the long-term nature of timber an investment today is an interesting option to help secure your financial future and maybe even that of your heirs.

Alternatively, if you are looking for UK Pension investment, forestry may just provide the returns you need to start in building your financial security for the later years in your life.

Whatever way you look at it, investment in timber is a solid financial choice.

Always seek advice from a qualified professional before committing to an investment.

Making An Investment

‘Save for a rainy day’ is how the adage goes and our elders too propagated the same so that we have an easy life and do not get stressed for want of money during trying circumstances. In order to make oneself well equipped to deal with the unexpected trials and tribulations that life brings in it is important to follow a good investment plan. It is highly prudent to come up with an ideal investment plan so that you have pragmatic goals that are achievable. Before actually getting into serious investment, it is essential that the investor has a sound financial foundation in place. There should be some kind of emergency funds for that rainy day and the house should be adequately insured.

Making an investment greatly depends on the amount of risk the investor is ready to take. Identifying the investment goal is also crucial because there are people investing actively for different reasons… for asset accumulation, for children’s education or for a major investment like a home. Being aware of the investment goal helps a lot because with this awareness you can decide upon the time horizon of your investment. Then comes the asset allocation.

Another crucial step in the investment plan is to decide on how much percentage of the savings are you going to invest in equities and how much in fixed income instruments like bonds and bond funds. When you are decided on this the next step is to put your investment plan into practice. This execution of the investment plan is probably the most difficult and challenging step for the investor’s investment journey. But once the hurdle is passed, maintenance should not be a problem. However, subsequent maintenance of the tempo also is crucial to let the plan get to completion.

There are a few other factors that will help in the investor’s decision making. Identifying the main cause of investing would give him a sense of commitment to stick to the plan. Otherwise the entire effort would be a directionless one. Understanding whether or not the chosen channel meets the requirements is very crucial… if it does, following up with the plan helps. But if it does not, it is always right to nip it in the bud and choose another investment channel that would meet the investor’s needs.

Identifying the time frame of the investment plan would give you clarity on the finances you may have at your disposal. Understanding your investment channel will greatly help in tapping the advantages to the fullest. For instance, if you are a novice in equities and are pinning your investments there, the amount of risk you are taking is very high. It is very important that you understand the stream of your investment well rather than follow the crowd.

Choice Financial Solutions is an independent financial adviser that is committed to offering its clients pertinent advice as far as investment and investment plans are concerned. The online firm offers services in the areas of investments, mortgages, pensions and protection. Get the expert’s opinions while investing in investment bonds or unit trusts or guaranteed income bonds or portfolio planning. They tailor their services so as to suit the needs of their customers.