Tired of the stock market’s wild swings? I don’t blame you. As of this writing, there have been 73 trading days in 2020. Forty of those days — roughly 55% — have seen the S&P 500 swing by more than 1%, almost entirely due to significant uncertainty surrounding the novel coronavirus outbreak.
That much volatility can give even the calmest and coolest of us a panic attack. Fortunately, there’s a solution for investors looking to save their portfolio from coronavirus-inspired stock market volatility (and all other future stock market volatility, too). It’s called FarmTogether.
In short, FarmTogether is a real estate crowdfunding platform of sorts that enables accredited investors to invest in U.S. farmland. That’s a big deal, since U.S. farmland is considered the “gold standard” in the investment world when it comes to generating strong returns, reducing volatility and diversifying through uncorrelated assets.
Further, think of U.S. farmland investing as a counterpoint to Covid-19’s impact on real estate at large. InvestorPlace spoke to Marc Moffitt, Adjunct Professor of Real Estate at the G. Brint Ryan College of Business of the University of North Texas, who commented with the following:
“It is still too early to see what will be the long term impact to the real estate market will be. If America can get back to work quickly, the impact to real estate will likely be minimal. However, housing prices in areas where large job losses have occurred will likely be affected downward significantly. Commercial markets will likely see downward pricing trends in specific asset classes that will largely depend on the specific impact and duration of the Covid-19 event. The general consensus among investors right now is that professional office space is likely ‘dead’ for the foreseeable future as companies recognize that physical presence in an office may not be as important as they once believed.”
The same doesn’t hold true for farmland, which has benefits that commercial real estate does not. And now, for the first time ever, personal investors can tap into those gold standard investment opportunities through FarmTogether.
Interested? Read on to find out more.
What Is FarmTogether?
FarmTogether is an online investment portal through which accredited investors can pick and choose various vetted U.S. farmland investment opportunities.
The process is simple.
- Create a profile on FarmTogether.com.
- Browse the platform’s various U.S. farmland investment opportunities, like this hazelnut orchard in Oregon or this almond and orange farm in California.
- Read about and watch in-depth videos of each investment opportunity on FarmTogether’s website.
- Invest in the opportunities that best suit your personal needs and investment goals.
- Track your investments over the course of their holding period (which usually spans several years), with tools like estimates of land appreciation.
- Earn cash distributions each year on your investments.
- Sell your investment at the end of the holding period, and pocket the return.
Investing in U.S. farmland has never been so simple and streamlined before — and that’s exciting news for investors as U.S. farmland is among the best investment options in the world.
Why Invest in U.S. Farmland?
There are four big reasons to invest in U.S. farmland:
First, U.S. farmland has a robust track record of generating strong returns. From 1970 to 2015, U.S. farmland generated average annual returns of 10.5%. For comparison, estimates for the average historical annualized return in the stock market range from 7% to 10%. So, U.S. farmland historically gives investors bigger returns than the U.S. stock market.
Second, U.S. farmland has an equally robust track of generating stable returns with mitigated volatility. That is, the average annualized volatility of U.S. farmland returns from 1970 to 2015 measured 6.4%. The average annualized volatility of U.S. stock market returns ranges from 12% to 15%, depending on your timeframe. So, U.S. farmland returns are historically (at least) 50% less volatile than U.S. stock market returns.
Third, U.S. farmland offers a means of powerful portfolio diversification through uncorrelated assets. U.S. farmland returns have shown to be negatively correlated to weakly positively correlated with U.S. stock market returns over the past few decades. That’s for the better. While the S&P 500 has posted nine negative years since 1990, U.S. farmland returns have been positive every single year since 1990.
Fourth, the supply-demand fundamentals of U.S farmland investing imply are highly favorable. Supply of U.S. farming land is falling by roughly 100 acres per day, because it is being converted for other purposes, such as housing, highways and commercial properties. Demand for U.S. farmland is rising, because the U.S. population is growing by roughly 4,000 people each day.
Falling supply plus rising demand equals bigger returns for U.S. farmland investments going forward.
Why Invest Now?
Just as there are four big reasons to invest in U.S. farmland for the long haul, there are two big reasons to invest with FarmTogether today.
First, the private investing revolution in U.S. farmland is in the first inning. The global farmland market measures $9 trillion, with only 2% of it owned by professional investors. An overwhelming 98% of this market is privately owned.
But, the volume of professional investment money flowing into U.S. farmland has essentially increased by five-fold since 2010, thanks to legislation changes which have allowed crowdfunding ownership of formerly private assets, as well as technological advancements which have allowed platforms like FarmTogether to dynamically feature and track traditionally complex, hyper-local farmland investments.
Second, a coming wave of generational change will accelerate the U.S. farmland private investing revolution over the next decade. Families own 97% of all U.S. farmland. Those farmers aren’t young. The average age of a U.S. farmer is 60. And in today’s digitally connected era, many of these farmers’ children don’t want to inherit or run the family farming business.
Thus, most experts estimate that about 50% of all U.S. farmland will change ownership hands over the next 20 years, implying a huge growth opportunity for crowdfunding platforms like FarmTogether to become huge players in the $2.5 trillion U.S. farmland market.
What Are the Risks?
Of course, U.S. farmland investing through platforms like FarmTogether isn’t all good. Investors should be aware of the shortcomings/risks before signing up for these platforms.
First, FarmTogether is for accredited investors only. That means you have to either make more than $200,000 a year, have a household income north of $300,000 a year or own more than $1 million worth of assets, excluding your primary residence. If you don’t check off one of those boxes, then you cannot invest on FarmTogether.
Second, the investments are not liquid. In the stock market, you can buy and sell stock in public companies, Monday through Friday, 9:30 AM Eastern to 4 PM Eastern. On FarmTogether, you commit money to a farmland investment opportunity for the duration of that investment’s holding period, which usually spans several years. That means that, while you earn cash distributions on your initial investment every year, you are not able to “withdraw” or “get your investment back” until the holding period is up.
Third, these investments are not small. Fractional trading has allowed investors to buy stock in any company in the world for as little as $1. U.S. farmland investing is not like that. On FarmTogether, the minimum investment is $10,000. Thus, if you’re not willing to commit $10,000 to an investment and have that money locked up for several years, FarmTogether is not for you.
Bottom Line on FarmTogether
Indeed, the private investing revolution is here.
Over the next decade, we are going to see tremendous democratization across the investment world, thanks to improving legislation and technological advancements. Personal investors will be able to seamlessly invest in previously “walled off” investment opportunities, like real estate, startups, fine art and, yes, U.S. farmland.
What’s more, the market for crowdfunding is “uniquely positioned” right now, according to Professor Moffitt. “Generally speaking, when the stock market declines, investors look for alternative investments such as real estate that hold hard physical assets,” said Moffitt. “Depending on the asset types they are investing in, we anticipate that these crowdfunding operations will likely experience an increase in their effective purchasing power. Due to their ability to raise capital efficiently for specific purchases, crowdfunding platforms are uniquely positioned to take advantage of opportunities that arise in real estate markets as result of the Covid-19 event.”
Of all the aforementioned private investment opportunities, U.S. farmland is arguably the most attractive. The track record is long and flawless. Returns are big. Volatility is low. Correlation is null. On top of that, you get big cash distributions and the fundamentals are strong.
What more could you ask for?
The answer is not much. And, because that is the answer, I’d encourage accredited investors to go check out FarmTogether. Do your portfolio a favor during this pandemic, and add some U.S. farmland to it.
Luke Lango is a Markets Analyst for InvestorPlace. He has been professionally analyzing stocks for several years, previously working at various hedge funds and currently running his own investment fund in San Diego. A Caltech graduate, Luke has consistently been rated one of the world’s top stock pickers by various other analysts and platforms, and has developed a reputation for leveraging his technology background to identify growth stocks that deliver outstanding returns. Luke is also the founder of Fantastic, a social discovery company backed by an LA-based internet venture firm. As of this writing, Luke Lango did not hold a position in any of the aforementioned securities.