Investors seeking income can no longer rely on share dividends, and saving deposit accounts often generate a negative return when adjusted for inflation. Whilst this scenario looks set to continue for the foreseeable future, we must look elsewhere for our annual pay-outs.
At the most basic level, agriculture investments based on the acquisition of agricultural property assets generate income, either from leased payments from tenant farmers, or shared revenue from harvests when farmed as part of a contract farming agreements (CFA).
There are a number of options for investors to consider, allowing smaller investors to take a direct stake in productive farmland and benefitting from a share of the annual income as well as potential capital growth as land values rise over time.
Such options exist in Latin America, Australia and Africa, and investors should be encouraged to seek independent advice as to the suitability of any such scheme to ensure suitability for the investors specific circumstances and attitude to risk.
Renewable Energy Investments
As the global population grows demanding more energy, and natural resources such as coal oil and gas continue to diminish, the world turns to renewable sources capable of supply energy in perpetuity without causing damage to the environment and delicate global ecosystem.
Around the world, governments incentivise investment in renewable energy technologies such as wind, solar, tidal, geo thermal, waste to energy and anaerobic digestion through feed-in-tariffs, where each unit of energy fed into the national grid is paid for at a set rate which is invariably linked to inflation.
This present those looking for income capture annual revenue that shares no correlation with traditional income investment assets or financial market fundamentals. Investors may choose to establish solar panels or wind turbines, collecting feed in tariffs from energy generated. Other may choose to grow renewable energy crops for the production of biofuels or for use as biomass fuel.
Renewable energy investments then are ideal non-correlated income investment tools, replacing lost dividend or interest income and offering to hedge that income stream against the effects of inflation.
Forestry investments have long been used as a tool to diversify and optimise investment portfolios by institutional investors, and now a range of options exist for smaller investors to purchase plots within larger, professionally managed timber plantations.
Trees continue to grow every year so forestry investment can grow even when other assets fall in value. Investors choose forestry to ensure at least a part of their portfolio retains value and even grow every year, and as timber prices also increase, forestry investment offer a double edged sword of capital growth.
Faster growing timber species such as bamboo (which is technically as grass), offer shorter term income opportunities as they can grow into harvestable timber within a few years, whilst other commercial species like teak take up to 25 to 30 years to reach maturity.
This means fast growing timber species make for ideal income investments, also providing coverage of capital being backed by physical property assets.
Whilst a range of alternative investment options exist, these esoteric investment options are not suitable for every investor. All of the above options lack any kind of immediate liquidity, so potential investors must be prepared to tie up their funds for at least five years.
Liquidity aside, investor must also work with an advisor with experience in these sectors, preferably being able to demonstrate that they have delivered and exited performing investment previously.