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Farmland benefits

Several factors make farmland a uniquely stable asset class.

For one, the underlying commodity is absolutely essential. Demand for wheat, soybean, canola seeds and corn will never go away. And this year, the ongoing conflict in Eastern Europe, along with protectionist policies in India, has created a global supply shock. Food prices have skyrocketed.

Farmland owners benefit from this upswing. This makes it a highly effective inflation hedge — even better than most stocks and bonds. So it’s not a big surprise why billionaires have invested (heavily) in the space in recent years.

Bill and Melinda Gates — prior to their divorce — accumulated roughly 270,000 acres of farmland in less than a decade. Amazon founder and chairman Jeff Bezos has amassed 420,000 acres in recent years.

Other noteworthy farmland investors include Ted Turner and Thomas Peterffy.

According to data published by the U.S. Agriculture Department, about 80% of rented farmland is owned by investors who do not farm themselves. This ratio could increase as more investors get involved and the barriers to entry drop.

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Investing in farmland

Investing in farmland directly is expensive and complicated. But retail investors can add exposure to farmland through specific publicly traded real estate investment trusts.

Gladstone Land (LAND) is one of the few “pure-play” farmland REITs in the market. The company owns 112.5 million acres of farmland that is leased on a triple-net basis to farmers with excellent credit history and experience. According to the company’s latest quarterly report, its occupancy rate is 100%.

Gladstone currently offers a 2.2% dividend yield.

Farmland Partners (FPI) is another REIT focused on agricultural land across the U.S. The company owns 185,700 acres in 19 states and manages over 100 tenants who grow 26 major commercial crops. While the majority of the portfolio is farmland, it also owns groundwater assets and grain facilities across its properties. The stock offers a 1.7% dividend yield.

Investing in farmland through these two REITs may not add much passive income to your portfolio. But they certainly have the potential to provide capital appreciation and inflation protection.

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Fine art as an investment

Stocks can be volatile, cryptos make big swings to either side, and even gold is not immune to the market’s ups and downs.

That’s why if you are looking for the ultimate hedge, it could be worthwhile to check out a real, but overlooked asset: fine art.

Contemporary artwork has outperformed the S&P 500 by a commanding 174% over the past 25 years, according to the Citi Global Art Market chart.

And it’s becoming a popular way to diversify because it’s a real physical asset with little correlation to the stock market.

On a scale of -1 to +1, with 0 representing no link at all, Citi found the correlation between contemporary art and the S&P 500 was just 0.12 during the past 25 years.

Earlier this year, Bank of America investment chief Michael Harnett singled out artwork as a sharp way to outperform over the next decade — due largely to the asset’s track record as an inflation hedge.

Investing in art by the likes of Banksy and Andy Warhol used to be an option only for the ultrarich. But with a new investing platform, you can invest in iconic artworks just like Jeff Bezos and Bill Gates do.

About the Author

Vishesh Raisinghani

Vishesh Raisinghani

Freelancer

Vishesh Raisinghani is a freelance contributor at Money Wise.

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