How to Invest in Farming

When you're tired of putting your money into traditional stocks and bonds, one alternative to consider is that of agriculture. Investing in a farm allows you to speculate on the price of food, which is something the world will always need. If you decide to invest in farming, a few different options are available. All of them will allow you to gain exposure to this market, but they vary in terms of how much exposure you will likely receive.

Instructions

1. Invest in a local farm. Many local farms could use investments from customers or locals to help expand or get off the ground. Some farmers do not have the necessary credit to get a traditional loan or the assets to back up the loans. By offering a loan, you can bring in interest on your investment and help a farm. It may be hard to find an opportunity such as this, but some farms offer opportunities to invest and advertise them in classified ads and local newsletters.

2. Put money into agricultural exchange-traded funds. Exchange-traded funds pool together the resources of investors. A fund manager makes the individual investment decisions for the fund. When you put money into this type of investment, you do not have to worry about how the funds are invested. You simply choose an ETF that specializes in agricultural investment and then let the fund manager handle it for you.

3. Buy stocks of agricultural companies. Many large farming operations are traded publicly on the New York Stock Exchange and the NASDAQ. By opening an account with a broker, you can invest in the individual stocks of these companies -- which is a little like investing directly in a local farm, except on a much bigger scale.

4. Provide a micro-loan. In poor countries, many small farmers need access to micro-loans so that they can obtain the working capital they need. Through organizations such as Kiva, you can make a micro-loan for as little as $25 and earn a return on your investment. You will be helping a farmer in need and earning money at the same time.

Tips & Warnings

• Research the investments you pursue thoroughly before investing. When you put money into a farm, stock or ETF, you need to know as much as possible about the opportunity, which can help limit the possibility of making a bad choice.

• Investing in agriculture can be highly speculative. Commodities prices can swing wildly and result in a large loss.

References

• National Public Radio; Wary of Wall Street? Invest in a Dairy Farm; Laura Conaway; March 2009
• The Street; How to Invest in Commodities Sensibly; Daniel Dicker; November 2010
• The Motley Fool; Don't Miss This Opportunity to Invest in Agriculture; Jacob Roche; May 2011
• Oxfam; Investing in Poor Farmers Pays; Emily Alpert; June 2009