Stocks or equities are a key part of most portfolios. And while we’ve seen a strong bull market for years, we are watching that trajectory turn upside-down as economies around the world stumble back to their feet in the wake of the pandemic.
Even highly valued stocks can drop quickly over a bad quarterly report or a worrying economic forecast. Only a select number of blue-chip stocks are sturdy enough to weather storms without losing significant market value.
Historically, stocks do provide generous returns – over the past decade, the S&P 500 has boasted an average annual return of 9.85% — but not without stomach-churning drops when the economy hits a recession, like during the Dot-com boom and bust or the financial crisis that spawned the Great Recession.
In fact, just this year, the S&P 500 has tumbled around 19%. Slow economic growth, geopolitical uncertainty, or simply bearish sentiment can cause equities to drop and lead to substantial losses for a stock-heavy portfolio.
Bonds are meant to be a ballast for your financial portfolio, a steady investment that isn't likely to fall when the stock market does.
However, bonds are highly influenced by interest rates, and for years returns have barely matched inflation as interest rates hovered near 0%. Historically, bond returns have hovered around 5% — much less than the stock market, real estate or farmland. Bonds that do have a higher yield typically have a much higher risk for default.
Moreover, as the Fed aggressively raises interest rates to tame inflation, the bond market has entered a sell-off as well. Year-to-date, the S&P U.S. Government Bond Index has fallen 12% while the S&P 500 Investment Grade Corporate Bond Index has plunged 19%.
Many people automatically invest in real estate just by purchasing their own homes. Others take it further and invest in rental properties, residential and commercial, or real estate stocks.
Over the past two decades, private commercial real estate has seen average annualized returns of 10.3%, similar to the stock market.
But it’s not always smooth sailing.
Years of prosperity have been checkered by years of disaster; the U.S. saw a drastic collapse in the housing market during the 2007-08 financial crisis, for example. And now, surging mortgage rates are starting to push housing prices down again, and it's anyone's guess how long that trend will last. Just this week, the average 30-year fixed mortgage rate hit a two-decade high at 6.94%.
The S&P CoreLogic Case-Shiller index showed that home prices in 20 large cities in the U.S. fell 0.44% in July, marking the first decline in a decade.
Other measures are showing the same trend. Mortgage data provider Black Knight said that median home prices fell 0.98% in August — and that’s after a 1.05% decline in July.
Just looking at a graph on the rise and fall of crypto will give you whiplash. Take Bitcoin, one of the most mainstream of the many options available.
In November 2021, Bitcoin was at an all-time high of $68,000, only to plummet down to $35,000 by January 2022. At the time of writing, Bitcoin had lost even more value, hovering below $20,000.
As billionaire investor Warren Buffett points out, cryptocurrencies “don't produce anything, they can't mail you a check, they can't do anything, and what you hope is that somebody else comes along and pays you more money for them later on, but then that person's got the problem.”
Buffett told shareholders at Berkshire Hathaway’s 2022 meeting that if someone offered him all the Bitcoin in the world for $25, “I wouldn’t take it, because what would I do with it? I’d have to sell it back to you one way or another.”
Buffett has a different view of farmland. He says that if he were offered a 1% stake in all farmland in the U.S for $25 billion, he’d write the check in a heartbeat.
Why? Because farmland has consistently grown in value over the last three decades and has the potential to produce annual income. Since farmland is genuinely useful and productive — not just some hypothetical store of value, like cryptocurrency — investors can see the immediate benefits of that productivity. Depending on the management structure, investors can get a cut from both the leasing fees and crop sales, which can provide you with a cash income while the value of the asset appreciates.
Between 1992 and 2021, U.S. farmland delivered 10.74% average annual returns to its investors, according to research from FarmTogether using data from the NCREIF Farmland Property Index.
Not only that, farmland can help act as a shield against volatility; it’s hard to find something more stable than the literal ground underfoot.
When viewed on a risk-adjusted basis, farmland’s performance has historically been more impressive than traditional real estate, bonds and gold – and it’s significantly more stable than the stock market. Over the last 30 years, stocks saw average annual volatility of nearly 17%, compared to just 6.75% for farmland, according to research from FarmTogether.
And historically, farmland’s returns have been uncorrelated to common assets like stocks, bonds and real estate, helping to provide portfolio stability for investors during market downturns.
What's especially relevant right now is that farmland can also serve as a great hedge against inflation. When consumer prices rise, the prices of commodities like food generally rise, too. That means the value of a portfolio with farmland is more likely to keep pace – a good way to offset the rise in your own grocery bills.
“Now more than ever, investors are looking to diversify their portfolios into assets that can help preserve their capital, even when markets go awry," says FarmTogether Founder and Head of Strategy Artem Milinchuk.
"Farmland’s historical stability, coupled with long-term supply-and-demand fundamentals, position the asset to maintain, if not grow, its value – no matter the economic environment.”
How can you invest in farmland?
While you'll find plenty of farms in Bill Gates' portfolio, it's not a common factor in the average American retirement plan. That's because it's not cheap to buy a whole farming operation, nor is it easy to operate a farm with no prior agriculture experience.
Thankfully, those kinds of expensive, all-or-nothing investments aren't necessary anymore. Farmland investment managers like FarmTogether are now giving accredited investors the opportunity to buy stakes in these attractive but previously inaccessible assets.
Here's how it works: FarmTogether pursues institutional-quality farmland properties across the U.S., then partners with experienced local operators who manage the land. The full-service platform provides the information investors need to select and directly invest in specific properties, while FarmTogether takes care of the details.
As an investor, you can take a lower-risk position and just purchase a cut of the land, or you can go all the way and explore sole ownership if you prefer. Assuming the farm rises in value over the next decade, you can benefit from the appreciation of the land and profits from the sale.
You might be happy to wait for a larger payout from the sale of a California pistachio orchard, or maybe you prefer steadier, more immediate returns from an Illinois cornfield. You build your portfolio based on your own financial goals, and FarmTogether handles the rest.
Plant the seeds now, harvest the rewards later
Take a critical look at cryptocurrencies and tech stocks if you’re intrigued, but never forget that such speculative investments do not have a floor on their value.
Meanwhile, if you’re looking for an alternative investment that can offer reliable gains, stability and diversification, then take a good look at investing in farmland with FarmTogether.
Diversify your investments with farmland
You don’t have to own a farm to profit off farmland.
Farmland has proven to be one of the most stable assets of the past few decades — and with FarmTogether, you’re able to invest today. FarmTogether's platform gives accredited investors access to this exciting market, and one of the highest-yielding asset classes on a risk-return basis.
Sign up for FarmTogether to start investing in farmland.