Economics of Forest Management

Money Does Grow on Trees

Any good portfolio manager will advise you not to invest all your money in on e stock or bond. Diversification is important. Mutual funds, available, through most employers, offer some degree of diversification. For landowners, another investment opportunity is available…. tree farming. To illustrate tree farming’s potential economic returns, let’s assess before-tax returns for abandoned agricultural land and cut-over forest land. For comparison’s sake, returns for average and good land are presented. Regarding land cost, assume: 1. The land was inherited from your parents (no out-of-pocket costs) or 2. You bought you land for $300 per acre.

Now, Let’s compare these with some typical 401K-investment funds. Rate of return for each fund is given since the fund’s date of inception.