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Many farmers around the world have considerable wealth in the lands they own. Think about their farm assets such as buildings and machinery.
But despite those things, most farmers' cash flow and liquidity are still low. That means most of them can't cover the transition of their estate should something terrible happen in the future.
What can farmers do?
They can diversify their investments and make use of financial tools other than land, machinery, and livestock.
These are the best steps they can take to grow their wealth. Excellent investment avenues and alternatives for farmers include:
1. Precious Metals IRA
The meaning of retirement can vary for every family and household. Often, people engaged in agriculture don't retire easily, even in their senior years.
That's because they continue to take part in their farm's daily operations and decision-making processes actively.
This could be why only three per cent of the total population of farmers and ranchers in the US have individual retirement accounts (IRA).
What's an IRA? An IRA, which means 'individual retirement account,' enables anyone to delay paying taxes until they decide to withdraw their money.
If you've heard about the 401(k), the IRA works the same way. However, instead of being managed by an employer, the latter is something you choose and have control over.
IRAs are one of the best retirement investment avenues for farmers.
One form of IRAs that farmers should jump into is the precious metals IRA. Precious metals, such as gold and silver, have developed in value historically.
That's why this unique form of self-directed IRA can be an excellent channel for farmers and ranchers if they use it as a part of their retirement plans.
Visit site of famous precious metals firms if you want to learn more about investing in IRAs that use gold, silver, and other metals.
Another investment option for farmers is purchasing stocks. When an individual owns shares in a company, he's called a shareholder or stockholder. It means that he's a fractional owner of the corporation.
Why is stock buying perfect for farmers? Well, that's because, in modern stock trading, a person only has to click through online trading platforms to buy shares.
Stocks aren't represented on a certificate or piece of paper anymore. So, there's no need to visit the broker's office physically to make a transaction. Most farmers don't like leaving their farms, so investing in stocks suits them perfectly.
There are other aspects that convince farmers to buy stocks. These include:
- Dividend payments (distribution of a specific portion of company earnings to shareholders)
- Capital appreciation (rises in stock prices)
Note that there are also publicly traded companies that fall under the farming sector. Farmers who want to support farmland industries should purchase stocks from these companies.
3. Mutual funds
Farmers interested in stocks but lack knowledge on how to ensure the highest returns should try mutual funds instead.
A mutual fund is a pool of money from many investors. A financial investment expert known as a fund manager will then invest it in stocks, bonds, and other securities.
Mutual funds typically have medium risk, so they'll work well for farmers who are investing beyond agriculture for the first time.
Just like stocks, there are also farming-focused mutual funds that farmers can try.
Whichever type of mutual fund you're planning to invest in, be sure to consider the associated costs before shelling out for it.
That's because mutual funds, including exchange-traded funds, have fees associated with them.
4. Real estate investment trusts
A REIT or real estate investment trust is a company or a group of people that finances and operates income-producing real estate.
Farmers investing in REITs can access dividend-based income. It allows them to own a property without actually buying it themselves.
They can also help communities, especially their fellow farmers, grow and thrive when investing specifically in farmland real estate investment trusts.
Farmland REITs purchase farmland portfolios that can be leased to farmers who can't afford to buy a farm outright.
5. Peer-to-peer lending
The popularity of peer-to-peer lending rose sharply in the last couple of years. For farmers looking for investment avenues or alternatives outside agriculture, now is the perfect time to jump into p2p lending.
With peer-to-peer lending, farmers will have the opportunity to lend their money to private individuals, including their fellow farmers. Farm families often take on debt because the industry is capital intensive.
Since borrowers through p2p lending still repay monthly or quarterly, investors will receive a consistent cash flow, just like in traditional loans.
Other reasons why farmers should invest in peer-to-peer lending include:
- It's a form of passive income.
- P2p lending has high returns.
- Everything can be done online.
Farmers need long-term plans for their hard-earned money. Of course, diversification is crucial.
While there are many ways to invest in agriculture, you should also check out options that aren't directly tied to farmland.
For farmers, IRA, stocks, mutual funds, REITs, and p2p lending are only some of the many investment avenues and alternatives that can pay significant dividends in the long run.