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Timber Investment - is it worth it?

I've been looking into sustainable timber investment and it makes interesting reading. Ethical Forestry claim that an initial investment of £12,000 will yield a projected £104,189 over 12 years.

Now this sounds too good to be true, but demand for timber is high and set to grow, with China and Japan proving to be the biggest customers. Ethical Foresty also claim that the US predict the growth of this industry to be more than 55% by 2050.

However I know of someone who had this idea a few years ago and with his own land he planted poplar trees. They proved hard to sell as cheaper timber was being imported from the likes of Russia.

Yet I wonder if perhaps a company such as Ethical Forestry know their market better and certainly they aren't dealing in poplar wood.

So what's the general consensus about this type of investment? Obviously that site and all the other timber sites are bound to be biased so at least here I will get independent and knowledgeable opinions.
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Comments

  • I do hope that the experts will be along soon. One thing that everyone agrees on is that you should never respond to a cold call or mailshot. Companies that need to approach anyone and everyone can't have much to offer. Apparently anything that mentions the Amazon is no good either!

    Googling "timber investment scams" brings up some interesting information, not all bad.
    Who having known the diamond will concern himself with glass?

    Rudyard Kipling


  • Very true and I would never use anyone who approaches me in this way. I'm a copywriter and have been writing articles via my SEO boss for a client who has a website on sustainable timber investment. The Ethical Foresty was given to me as a trusted source for research purposes.
    I have googled the scams too but like any investment, there are scams everywhere in every field and you just have to make sure you do your research. Which is what I'm currently doing :)

    It does sound like a good investment idea on the face of it, but I would really like some advice from people either already investing or who know more about it all. I'm sure there must be someone who works in this field that can give me a little more information and either convince me that the figures really do add up or warn me off and direct me to an ISA instead.
  • jimjames
    jimjames Posts: 17,951 Forumite
    Part of the Furniture 10,000 Posts Photogenic Name Dropper
    Don't do it!

    Any claim of that kind of return should be taken with a sackful of salt not just a pinch. If that was guaranteed then everyone would do it but you have far more chance of losing all your money than making any.

    If it sounds too good to be true....
    Remember the saying: if it looks too good to be true it almost certainly is.
  • somethingcorporate
    somethingcorporate Posts: 9,449 Forumite
    edited 6 September 2012 at 4:44PM
    I've been looking into sustainable timber investment and it makes interesting reading. Ethical Forestry claim that an initial investment of £12,000 will yield a projected £104,189 over 12 years.

    Now this sounds too good to be true, but demand for timber is high and set to grow, with China and Japan proving to be the biggest customers. Ethical Foresty also claim that the US predict the growth of this industry to be more than 55% by 2050.

    However I know of someone who had this idea a few years ago and with his own land he planted poplar trees. They proved hard to sell as cheaper timber was being imported from the likes of Russia.

    Yet I wonder if perhaps a company such as Ethical Forestry know their market better and certainly they aren't dealing in poplar wood.

    So what's the general consensus about this type of investment? Obviously that site and all the other timber sites are bound to be biased so at least here I will get independent and knowledgeable opinions.

    That's an £18k investment according to the link, not £12k.

    "A typical forestry investment of £18,000 over 12 years projects returns of £104,189. The investments pay out in regular intervals, making them ideal for pensions, savings plans and family trusts."

    Edit - the following things are of concern just skiming the website.

    i) I dont know the specifics of this but a £1m+ return on £36k investment sounds very fishy to me: "A £36,000 Melina Income & Wealth Generator investment projects returns of £1,163,501 over 24 years."

    ii) They say it is recommended for property investors that require a regular income - but then only pays in 4 years intervals... compared to a property that would generate a monthly income - very odd comparison. This appears to be very high risk and incredibly (unbelievably so) ambitious.

    iii) The testimonials do not talk about any of the returns their customers have actually seen, merely how much they have invested and where.

    iv) The majority of their "in the press" articles are either contributed or written by the company themselves or are adverts they have paid for. There is hardly a glowing recommendation.
    Thinking critically since 1996....
  • PlutoinCapricorn
    PlutoinCapricorn Posts: 4,598 Forumite
    Part of the Furniture Combo Breaker
    edited 6 September 2012 at 6:31PM
    If you do WHOIS on the website, then Google the registrant, you will find that his previous directorships were with companies that are dissolved or in liquidation.
    Who having known the diamond will concern himself with glass?

    Rudyard Kipling


  • jimjames
    jimjames Posts: 17,951 Forumite
    Part of the Furniture 10,000 Posts Photogenic Name Dropper
    It does sound like a good investment idea on the face of it, but I would really like some advice from people either already investing or who know more about it all. I'm sure there must be someone who works in this field that can give me a little more information and either convince me that the figures really do add up or warn me off and direct me to an ISA instead.

    If you are prepared to go for a high risk unregulated investment where you have a very high chance of losing all your money then maybe you would consider it a good investment.

    How can figures add up when they are entirely projections that may have no basis in reality. We can all say what may happen over 10 years but markets can move in other directions very fast.

    Looking at the T&Cs they seem very biased towards the company. The company takes 6% admin fees from the proceeds. Once this is done they then take out all the other expenses. Anyone else think that this might mean that virtually nothing is left?

    The trees are "guaranteed" for 3 years. Strangely that ends before the 4 year payout is due. Co-incidence or a get out to avoid paying any money? Would you really want a 24 year investment that only pays out after 16 years? Finally "This contract shall be subject to Costa Rican law and to the exclusive jurisdiction of the Costa Rican courts."

    I'm out.
    Remember the saying: if it looks too good to be true it almost certainly is.
  • these are "projected" returns, not "predicted", i.e. "ethical forestry" is not even predicting they will happen, never mind guaranteeing it, never mind whether their word would be worth anything ...

    "projected" may mean that they are assuming the same rate of return seen in some historical period. apparently (though i know little about this), historical returns for forestry are very high if you pick a suitable historical period ending now. but it's a commodity: you'd expect periods of boom and bust. you can't sensibly pick an unusually good period and assume things will go on like that in the future.

    this is just 1 of many commodity markets, any 1 of which will make you a great return if you get the market timing right. or lose you money if you get it wrong. do you have any reasons for considering this specific commodity market, at this specific time? (i'm guessing the answer is no, but there could be good positive answers to this.)

    (the above is all about the general question of whether to invest in forestry. other posters have made some relevant comments about this specific way of investing in forestry.)
  • coastline
    coastline Posts: 1,662 Forumite
    Part of the Furniture 1,000 Posts Photogenic Name Dropper
    woodn't bother..;)
  • Thank you, it appears I couldn't see the wood for the trees on this occasion ;)

    It did seem too good to be true but looking at the small print there are certainly no guarantees and a lot of room for manouevre on their part.

    So is timber investment a complete no-go then or just that particular company "wood" you say?
  • Ah sorry Grey Gym Sock, I have now properly read your answer and you have incorporated my thoughts in there.

    As I said in my OP, my brother-in-law planted a field of poplar trees hoping it would provide good returns but he struggled to get a good price against cheaper Russian imported timber. I did wonder whether this was because he choose poplar wood?

    On the face of it, it does seem like a good idea. Timber is always in demand and in order to protect rainforests and other fragile eco-systems, sustainable forests appear to be a good idea. However illegal timber is always going to be cheaper so unless governments do something drastic to stop illegal logging then your plantation probably remains high risk. But who knows what may happen in say 20 years? Trees are not an inexhaustible commodity and as the population gets larger, the demand gets higher.

    I might pop this idea on my teak shelf for now.
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