Socially Responsible Investing (SRI)

What is Socially Responsible Investing (SRI)?

One of the biggest changes ever in the investment landscape has been the move in recent years to Socially Responsible Investing (SRI). While the concept may have begun in our country as an activity associated with religious societies – the Quakers not participating the slave trade – it has evolved immensely since. It is now a mainstream practice being embraced by both individuals and corporations.

Gone are the days when investors solely focused on factors such as diversification, investment income, rate of return, inflation, taxes and risks.  Nowadays, socially responsible investors are going one step further. They are also choosing to factor in whether a particular investment positively impacts society.

In other words, socially responsible investment works the same way as any style of investing. But in addition to the financial returns from an investment, it also considers the investments’ impact on environmental, ethical or social change

It enables you – the investor – to grow your money while doing good. And it allows you to invest in social causes you care about. 

Why Choose Socially Responsible Investing?

Who wouldn’t want a great way to boost their assets while also making a difference? That’s what SRI does.

Socially responsible investments seek to maximize the welfare of people and their environment while earning a return on one’s investment that is consistent with your individual goals.  In simple terms, the twin goals of socially responsible investing are: social impact and financial gain. 

Some question whether a do-good investment strategy can perform as well as standard investing strategies. The answer is yes. 

A 2020 research analysis from the asset management firm Arabesque Partners found that 80% of the reviewed studies demonstrated that sustainability practices have a positive influence on investment performance.

Several other studies have shown that SRI mutual funds can not only match traditional mutual funds in performance, but they can sometimes perform better. There is also evidence that SRI funds may be less volatile than traditional funds.

Even today, there are some that have doubts about socially responsible investing. Opponents have argued that by narrowing the field of investment options (such as avoiding weapons makers, gambling and tobacco stocks), the end result is a narrowing of investment returns. 

But now, there is a growing body of evidence (in addition to the aforementioned studies) that shows the opposite is true: SRI not only makes you feel good, but it’s also good for your portfolio.

What’s the Difference Between SRI and ESG Investing?

While at first glance, both SRI and ESG (Environmental, Social and Corporate Governance) investing look at a company’s broader impact, there are some distinct differences between the two.

First off, SRI investing is not as well defined as ESG investing. SRI is more subjective and based on an individual’s view of the world – political views, what is right and wrong, and what is ethical, etc. 

In contrast, ESG investments are measured by and scored on specific environmental, social and governance metrics. More specifically, ESG investing looks at specific factors, such as a company’s best practices when it comes to pollution or women’s rights

SRI, on the other hand, takes these factors into account and blends them with an investor’s personal values.

Bottom line: SRI involves screening investments to exclude businesses that conflict with the investor’s values. While ESG investing focuses on companies making an active effort to either limit their negative societal impact or deliver benefits to society (or both).

How to Participate in Socially Responsible Investing?

You have a number of options available to you if you want to invest in good causes. You can make socially responsible investments via individual stocks. However, the better (and safer) bet is to do so through socially conscious mutual funds and exchange-traded funds (ETFs).  A simple search on Magnifi indicates numerous ways for investors to access SRI funds with low fees.

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The information and data are as of the May 28, 2020 (publish date) unless otherwise noted and subject to change. This blog is sponsored by Magnifi.

This material is provided for informational purposes only and should not be construed as individualized investment advice or an offer or solicitation to buy or sell securities tailored to your needs. This information covers investment and market activity, industry or sector trends, or other broad-based economic or market conditions and should not be construed as investment research or advice. Investors are urged to consult with their financial advisors before buying or selling any securities. Although certain information has been obtained from sources believed to be reliable, we do not guarantee its accuracy, completeness or fairness. Past performance is no guarantee of future results. This content may not be reproduced or distributed to any person in whole or in part without the prior written consent of Magnifi. As a technology company, Magnifi provides access to tools and will be compensated for providing such access. Magnifi does not provide broker-dealer or custodial services.


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Wind Energy

Wind Energy

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While wind energy as a reliable and standard resource may seem far off, the technology is being adopted at record speed. In fact, wind energy is one of the fastest-growing energy sources in the world, according to the U.S. Department of Energy.

That’s especially true for 2020, a banner year for the wind industry, according to a report by American Clean Power (ACP).

In the fourth quarter of 2020 alone, the U.S. wind industry installed 10,593 megawatts of new wind power capacity—the highest quarter on record. In fact, that’s more wind power capacity installed than in any given year except 2012.

Texas led with 2,197 megawatts installed, followed by Wyoming with 895 megawatts, Oklahoma with 866 megawatts, Iowa with 861 megawatts, and Missouri with 786 megawatts.

Who is investing in all of this wind? Developers commissioned 16,913 megawatts, representing an 85% increase over 2019. Project owners commissioned 54 new projects across 20 states in the fourth quarter.

This rapidly accelerating trend is being driven by a combination of increased policy initiatives, more scalable technologies, increased demand from corporate and residential customers alike, and more positive customer perception overall. The Biden Administration’s climate plan, for example, includes the ambitious goal of becoming carbon-neutral by 2035. To achieve that, renewables like wind energy will need to become increasingly less fringe as they move to permanently replace fossil fuel power. 

What is wind energy?

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The information and data are as of the November 17, 2020  (publish date) unless otherwise noted and subject to change. This blog is sponsored by Magnifi.

This material is provided for informational purposes only and should not be construed as individualized investment advice or an offer or solicitation to buy or sell securities tailored to your needs. This information covers investment and market activity, industry or sector trends, or other broad-based economic or market conditions and should not be construed as investment research or advice. Investors are urged to consult with their financial advisors before buying or selling any securities. Although certain information has been obtained from sources believed to be reliable, we do not guarantee its accuracy, completeness or fairness. Past performance is no guarantee of future results. This content may not be reproduced or distributed to any person in whole or in part without the prior written consent of Magnifi. As a technology company, Magnifi provides access to tools and will be compensated for providing such access. Magnifi does not provide broker-dealer or custodial services.


Geothermal Energy

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Geothermal energy is nothing new. It goes back as far as the first century A.D. in Pompei, where baths were heated by hot springs.

And it’s already powering major cities in the modern world. For example, Iceland’s capital city, Reykjavik, which has long been considered one of the cleanest cities in the world, heats 95 percent of its buildings using geothermal energy.

In Paris, the Dogger Aquifer has supplied geothermal heat and hot water since 1970. It currently supplies 210,000 housing units. In mid-2021, drilling is set to begin in Paris on another geothermal well. 

In Munich, officials of the utility company Stadtwerke München (SWM) want to expand the geothermal district to 560,000 households. 

In the US, Boise, Idaho is home to the largest geothermal heating system in the country. The system heats 6 million square feet for only about $1,000 a month, which pays for the electricity to pump it. Boise sits by a unique resource— a geological fault where 177-degree Fahrenheit water rises to the surface in the foothills just outside of town.

But geothermal energy doesn’t require a warm, babbling brook nearby. In fact, “the US already produces 3.7 gigawatts (GW) of geothermal electricity, or enough to power more than 1 million homes,” according to a report by Yale Environment 360.

These days, investors, government sectors, and oil and gas companies are getting on board the geothermal energy potential. Here’s what investors should know. 

What Is Geothermal Energy?

Heat exists in the earth’s mantle around the world, no matter where you are standing. 

That’s because geothermal heat comes from the Earth’s core, where temperatures may reach 4,000-7,000°C. For perspective, the surface of the sun is approximately 5600°C (but at its core can reach more than 15,000,000°C).

While geothermal heat can naturally rise to the earth’s surface water through fissures, cracks and permeable rock, those presentations aren’t necessary to access the energy. Even in locations that don’t have readily available resources that reach the surface, the heat from the earth’s core can still be made accessible. 

This is because deep drilling techniques allow hot water that sits two to three miles below the surface to be pumped and used to heat or to generate electricity.

The fact that geothermal heat is everywhere under our feet means that there is an “enormous untapped potential” for geothermal energy consumption.

Why Invest in Geothermal Energy?

While wind and solar energy might come to mind more quickly when talking about renewables, geothermal could far outpower these. In part that’s because unlike the sun or the wind, geothermal energy is “always on,” per the US Department of Energy. 

Chief Marketing Officer for Baseload Capital, an investment firm in Sweden focusing on geothermal projects, referred to the geothermal industry as “the sleeping giant.” This is because geothermal energy can provide significant energy resources at all hours of the day, combating climate change in a real way. 

According to the US Department of Energy report, GeoVision: Harnessing the Heat Beneath Our Feet, geothermal technology has enormous potential in the US. Instead of electric-powered air conditioners and natural gas-powered heaters, for example, geothermal powered heating and cooling solutions can power American homes.  

In order for geothermal energy to reach its potential in the US, three things have to happen according to the US Department of Energy report: (1) increased access to geothermal resources, (2) reduced costs and improved economics for geothermal projects, and (3) improved education and outreach about geothermal energy. According to the report, by overcoming these technical and financial barriers, electricity generation through geothermal methods could increase 26-fold by 2050, providing 8.5 percent of the United States’ electricity, as well as direct heat.

The US isn’t the only country looking underground to solve energy problems. In Europe, the output of geothermal energy supply could increase eight-fold by 2050, according to the International Renewable Energy Agency (IRENA)

The good news is that when it comes to drilling, oil and gas companies know a lot. They, too, are looking at geothermal energy these days. 

In 2021, oil and gas companies may finally start investing in geothermal.  This is true as geothermal economics begin to improve, and after oil and gas underperformed from 2014 - 2020. Both BP and Chevron, for example, backed a $40 million funding round for Eavor, a Canadian geothermal energy firm, in early 2021. Eavor’s technology offers a closed-loop system that can potentially scale geothermal production, producing “enough heat for the equivalent of 16,000 homes with a single installation.” 

Governments are also backing research around the world. 

In Utah, the Frontier Observatory for Research in Geothermal Energy (FORGE), funded by the US Department of Energy, is an underground research laboratory. It just completed drilling its first well at a 65° angle from vertical reaching true vertical depth of 8,559 feet. The laboratory offers a test environment for future Enhanced Geothermal Systems (EGS) projects around the world that enable access to geothermal in locations that don’t have babbling warm brooks nearby, but rather require complicated drilling to access geothermal energy. 

Breakthrough Energy Ventures, a fund backed by Bill Gates and other notable billionaires recently invested an additional $30 million in the startup Dandelion Energy, which heats homes with geothermal. 

When it comes to geothermal energy, it is less a matter of if and more a matter of when technology is able to fully harness the energy beneath the surface of the Earth. With the number of potential disruptive and scalable technologies, eager large-scale investors, increasing public knowledge, and climate change imperative, geothermal will be getting more attention in the decades to come. 

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The information and data are as of the April 6, 2021 (publish date) unless otherwise noted and subject to change. This blog is sponsored by Magnifi.  This material is provided for informational purposes only and should not be construed as individualized investment advice or an offer or solicitation to buy or sell securities tailored to your needs. This information covers investment and market activity, industry or sector trends, or other broad-based economic or market conditions and should not be construed as investment research or advice. Investors are urged to consult with their financial advisors before buying or selling any securities. Although certain information has been obtained from sources believed to be reliable, we do not guarantee its accuracy, completeness or fairness. Past performance is no guarantee of future results. This content may not be reproduced or distributed to any person in whole or in part without the prior written consent of Magnifi. As a technology company, Magnifi provides access to tools and will be compensated for providing such access. Magnifi does not provide broker-dealer or custodial services.


Waste Management

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While investing in trash might not seem appealing, the predictability of the returns the industry generates should be— especially in a post-pandemic market. Consider that the global waste management market size was $2 trillion in 2019. It is expected to grow to $2.3 trillion by 2027, according to Allied Market Research.

Waste isn’t going anywhere. In fact, it’s projected to increase. Worldwide, municipal solid waste generates approximately 1.3 billion tons per year, which is expected to increase to approximately 2.2 billion tons per year by 2025.

Why So Much Trash?

For one thing, trash is fueled by consumerism. While the US represents just 4 percent of the world’s population, it produces 12 percent of global municipal solid waste (MSW), according to a new report by the research firm Verisk Maplecroft. In fact, the average American is responsible for 1,704 pounds of garbage per year, which is approximately three times the global average. 

This is the case for other high-income countries as well. According to the World Bank, high-income countries generate about 34 percent, or 683 million tons, of waste globally, even though they only account for 16 percent of the world’s population.

The projected waste increase is also linked to the increase in the global population and the growth of urbanized populations.

Waste management is vital for the health and sustainability of cities. But, filling landfills isn’t what it used to be. Waste management innovation can actually play a major role in promoting sustainability and reducing the impact of climate change, which presents major opportunities for the waste management industry. 

What Is Waste Management?

The waste sector consists of MSW landfills, industrial waste landfills, industrial wastewater treatment systems, and facilities that operate combustors or incinerators for the disposal of nonhazardous solid waste, according to the United States Environmental Protection Agency. 

Waste management is “the transportation and disposable garbage, sewage, and other waste products. It involves treating solid waste and disposing unwanted products and substances in a safe and efficient manner,” according to Allied Market Research. The five major categories of MSW— or the waste that gets picked up on the curb— includes paper, food waste, plastic, metal, and glass. 

There is some seasonality related to waste management. In the winter, for example, construction slows, and so does construction related waste. After storms, waste removal needs tend to increase. 

Why Invest in Waste Management?

First, consider that waste management isn’t limited to trash pickup at your home. Commercial and residential entities have much higher waste needs. In fact, residential waste management accounts for under a third of the waste business.

But, residential pickup is steady business. Residential accounts are typically negotiated in 3-10 year contracts with municipal governments or homeowners associations. Sometimes, waste management companies have direct subscription services to individual customers. When contracts are renewed, it’s not typical for customers to switch providers, although it’s not unheard of. 

Interestingly, the pandemic caused industrial waste to decrease because of various lockdown or shutdown measures. But, because everyone was home, residential waste increased exponentially. The pandemic also caused the demand for recyclables to drop, meaning that more trash was sent to landfills. The pandemic also greatly increased the need for the proper disposal of medical waste, including used masks, gloves, suits, syringes and other medical equipment. It is anticipated that as industries resume full-capacity production, so too will industrial waste management needs resume a greater capacity.

Waste management companies typically own the landfill sites, acting as a landlord for other companies that pay for a portion of landfill capacity. 

Take the company Waste Management, for instance, which has 20 million customers in 48 states and Canada as well as a team of 44,900 employees. It may not be the most glamorous company, but its business model is easy to understand. Waste Management owns nearly 400 collection operations, 249 active solid waste landfills, 297 transfer stations, and 104 recycling centers, making it the largest non-hazardous waste operator. 

These factors, and the fact that new landfills are hard to establish, make it hard for smaller competitors to gain market share. For investors, that means that major waste management companies can offer stable and reliable dividend stocks. 

In general, waste management as an industry provides an essential service. More than 80 percent of its revenue is generated by services provided, which means that its revenues tend to remain stable even if the economy dips. In that capacity, the industry is considered recession-proof in some ways. Even if you lose your job, your trash will still need to be picked up. 

While the business of waste management might seem stale, they have the ongoing opportunity for increased margins by increasing efficiency. (Think picking up dumpsters when full instead of half empty.)

In addition to increasing waste, the waste management industry has opportunities for implementing renewable technologies. Waste is linked to greenhouse gas emissions. According to the EPA, landfill gas (LFG) is a natural byproduct of the decomposition of organic material in landfills. It is composed of roughly 50 percent methane, 50 percent carbon dioxide, and a small amount of non-methane organic compounds.  

The good news is that waste management companies can do something about it. Waste Management, for example, captures landfill gas and uses it to power residences, businesses and even trucks. Waste is growing, with it, so too will the need for waste management and innovation. 

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Magnifi is changing the way we shop for investments, with the world’s first semantic search engine for finance that helps users discover, compare and buy investment products such as ETFs, mutual funds and stocks. Open a Magnifi investment account today.

The information and data are as of the March 8, 2021 (publish date) unless otherwise noted and subject to change. This blog is sponsored by Magnifi.

This material is provided for informational purposes only and should not be construed as individualized investment advice or an offer or solicitation to buy or sell securities tailored to your needs. This information covers investment and market activity, industry or sector trends, or other broad-based economic or market conditions and should not be construed as investment research or advice. Investors are urged to consult with their financial advisors before buying or selling any securities. Although certain information has been obtained from sources believed to be reliable, we do not guarantee its accuracy, completeness or fairness. Past performance is no guarantee of future results. This content may not be reproduced or distributed to any person in whole or in part without the prior written consent of Magnifi. As a technology company, Magnifi provides access to tools and will be compensated for providing such access. Magnifi does not provide broker-dealer or custodial services.


Sustainable Energy (Alternative)

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Renewable energy has a presence on both the American and the global stages with lots of room for growth. Perhaps unexpectedly, the pandemic did not slow renewable energy down. Instead, the public health crisis that seemed to stop the world in many ways actually accelerated the transition to renewables and away from fossil fuels. 

Part of that growth might be credited to Corporate and Environmental, Social and Governance (ESG) investment funds, which have clearly demonstrated that adopting renewables is good business, according to Duke Energy

2020 was the year that renewable energy generation established itself as the cheapest, at-scale, proven energy option available, exceeding coal-fired energy production, also according to Duke Energy. 

And that was before the Biden administration announced its ambitious goals for renewables and alternative energy. 

Renewable energy is anticipated to keep growing in 2021, especially considering the Biden administration’s stated goals of (1) achieving a 100% clean energy economy and (2) reaching net-zero emissions no later than 2050. To achieve this, the Biden administration has resubmitted the US to the Paris climate agreement as well as implemented executive orders to move the country away from reliance on oil and gas and toward renewables.

These policies include lowering or eliminating existing subsidies on fossil fuels as well as funding renewable sector investments designed to help spur job growth in both the solar and wind industries.

Alternative energy is becoming the norm and, now more than ever, is clearly the future. Here are the alternative energy sources that all investors should consider. 

What Is Sustainable Energy?

Alternative and renewable energy is energy that is generated by natural resources that readily replenish: the warmth of the sun, the blow of the wind, the movement of water, and the heat inside the earth to name a few. These resources do not generate greenhouse emissions. 

During the first five months of 2020 alone, renewable energy provided 25.3% of electricity in the US. That is more than a sliver of the energy pie, and it’s growing. 

The 7 types of renewable energy include solar, wind energy, hydroelectric, ocean, geothermal, biomass, and hydrogen. According to Duke Energy, the leading commercial renewable energy sources (ranked by market share and growth) include: wind, hydropower, solar, geothermal, and other technologies bolstering the renewable transition.  

Wind 

Wind and solar are expected to supply 70% of new power plant capacity built in 2021. Wind energy, unlike some other renewable resources, is available nationwide. It has the potential to be a viable source of renewable electricity in every state by 2050, according to the Wind Vision Report published by the Office of Energy Efficiency and Renewable Energy. 

In the case of wind power, new (gigantic) turbines are providing more promise than ever. G.E.’s latest wind turbines have a rotor with a turning diameter longer than two football fields. Compared to the largest turbines currently in service, they generate about one third more power. Compared to the first machines of their kind installed offshore in Denmark in 1991, they generate 30 times as much power. As wind energy infrastructure improves and becomes more widespread, wind energy will no doubt grow its market share. 

Hydropower

Hydropower uses moving water to generate electricity. Hydropower accounts for 52% of the nation’s renewable electricity generation and 7% of total electricity generation, according to the National Hydropower Association. While hydropower infrastructure tends to be dated (think dams, etc.), its power generation capacity is still very relevant. Even more, hybrid hydropower/solar plants (where floating solar panels are installed on the water of reservoirs, etc. that power dams) are becoming increasingly popular. 

Solar 

Despite the pandemic-induced economic downturn, solar installations increased in 2020. Solar generation is expected to account for 48% of US renewable generation by 2050, which would make it the fastest growing renewable power source, according to the Center for Climate and Energy Solutions. 

No doubt, President Biden’s policies will further expand the industry. His initiatives to spur the industry include a review of Section 201 solar tariffs, countervailing duties, and anti-dumping laws by the International Trade Commission. If these tariffs are reduced or repealed, it could have an enormous impact on the development of solar energy. 

It is also expected that tax credits and low interest financing available in the down economy will make solar energy installation more accessible both commercially and residentially in the year to come. 

Geothermal

Geothermal energy, or heat from the earth, can be extracted by drilling deep wells to warm underground water sources. While geothermal energy lags behind wind and solar, it has enormous potential, with the U.S. leading in geothermal energy production. 

Although geothermal energy might not seem as “front page” as renewables like solar and wind, it is getting investment attention. Breakthrough Energy Ventures, an investment firm that funds technologies that seek to limit carbon emissions (with backers including Jeff Bezos and Bill Gates) notably back geothermal technologies. Companies that have received investment include Dandelion Energy, which installs geothermal-powered heating and cooling systems for residential homes. 

Other Technologies

There are a host of other industries that will support the transition to a more renewable-based economy. These include effective energy storage (capturing and storing energy to use it at another time), fuel cells (which generate power with fuel), increased energy efficiency that reduces the need for energy generation), and electrification. 

There was a time when commercializing renewable energy seemed as far off as a flying car. But, that’s no longer the case. As more industries adopt renewable infrastructure, more companies strive to be green, and more consumers and investors demand both, the alternative energy industry will become increasingly mainstream. 

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Magnifi is changing the way we shop for investments, with the world’s first semantic search engine for finance that helps users discover, compare and buy investment products such as ETFs, mutual funds and stocks. Open a Magnifi investment account today.

This blog is sponsored by Magnifi. The information and data are as of the February 10, 2021 (publish date) unless otherwise noted and subject to change. 

This material is provided for informational purposes only and should not be construed as individualized investment advice or an offer or solicitation to buy or sell securities tailored to your needs. This information covers investment and market activity, industry or sector trends, or other broad-based economic or market conditions and should not be construed as investment research or advice. Investors are urged to consult with their financial advisors before buying or selling any securities. Although certain information has been obtained from sources believed to be reliable, we do not guarantee its accuracy, completeness or fairness. Past performance is no guarantee of future results. This content may not be reproduced or distributed to any person in whole or in part without the prior written consent of Magnifi. As a technology company, Magnifi provides access to tools and will be compensated for providing such access. Magnifi does not provide broker-dealer or custodial services.


Land

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For an open-minded investor, the idea of investing in land might bring to mind a range of dreams: a “sold” sign on a wide-open space near the mountains, an “under new ownership” notice for a busy apartment complex in an urban neighborhood, or a breaking ground on a commercial mixed-use space in an up-and-coming suburb. All are correct and more.

Land is a finite resource with many uses beyond real estate that range from farming to mining for natural resources and beyond. There is no doubt that investing in raw land gives investors options.

Although real estate markets ebb and flow, land tends to appreciate in value over time. This is no surprise given the dynamics of a limited supply, increasing demand, and a growing population. For example, according to the United States Department of Agriculture (USDA), “the United States farm real estate value, a measurement of the value of all land and buildings on farms, averaged $3,160 per acre for 2019, up $60 per acre (1.9 percent) from 2018.” That’s an increase of $1,610 per acre from 2005. 

While buying land offers a broad range of investments from real estate to agriculture, investing in land isn’t a quick-solution or an endeavor to take lightly. Here’s what investors should know and consider.  

What Are Land Investments?

Overall, there are three types of real estate investments: commercial, residential, and vacant or raw land. The uses for raw land can be further broken down into categories including row crop land, livestock-raising land, timberland, mineral production land, vegetable farmland, vineyards, orchards, and recreational land. Land can also be purchased and held until appreciation. 

When it comes to land investment, things aren’t always as they seem on the surface. There are a number of different rights to be aware of, which include:  

1)  Air rights: An investor might own the land, but do they own the airspace above it? Not necessarily. Owning air rights gives the investor the right to use, rent, or develop the space above the land without interference by others. This often comes into play in commercial real estate when zoning requirements determine how many stories tall a developer can build. 

2)  Mineral rights: Mineral rights are “legal rights or ownership to the minerals below the surface of real estate, which can include coal, oil, natural gas, metals, and more.”

3)  Water rights: Water rights “are the legal rights to use water from a local source such as a river, ditch, pond, or lake.” Water rights tend to be different in the East vs the West. In Eastern states, landowners who have a waterway that moves through their property may use water in a reasonable way, not unreasonably detaining or diverting it. In Western states, water rights must be established before using any source of water. In these areas, water rights are typically sold separately from land. 

4)  Zoning: Local governments and municipalities have established rules and regulations that determine how a property may or may not be used. Properties may be zoned as residential, commercial, industrial, agricultural, recreational, historical, or aesthetic. As a developer, it’s crucial to make sure that your plans align with the zoning requirements.  

5)  Ingress and Egress: If an investment property doesn’t have direct road access to the parcel of land on which it sits, formal easements may be required. 

Simply put: when it comes to investing, not all land is created equal and research is required. 

Why Invest in Land?

Land is a dynamic investment with lots of opportunity—it can yield high returns, passive income, and large profit margins. Investors can plan to develop raw land, buy and hold, buy and lease, buy and sell with owner financing, or flip the land as it is into something entirely new. 

It’s possible to generate future income by purchasing raw land and doing minimal maintenance, (especially if you are planning to keep it vacant and let it appreciate). Investing in raw land for purposes of development, however,  “requires more patience and a penchant for long-term strategies.” 

Before investing, investors should calculate your cap rates, or an investment’s yields and potential risks. Regardless of how you plan to utilize land for returns— for farming, real estate, leasing, or other— investors should consider the trends in those markets both locally and nationally. 

Investors should also consider taxes, especially when it comes to reselling land. If an investor owns a piece of land for less than one year before selling, tax rates can be as high as 37 percent, according to the Tax Policy Center.

Of course, for investors looking for a less direct, less expensive, and much less time intensive way to diversify into land investing, ETFs offer a range of opportunities. These include real estate ETFs or Real Estate Investment Trusts (REITS) and agricultural ETFs. 

REITs typically invest in “securities that are related to mortgage financing of real estate, including not only mortgage loans but also mortgage-backed securities and similar derivative investments.” REITs may focus on their property type, such as residential, retail, healthcare, self-storage, industrial, office, hotel, data center, or timber REITs. 

Moreover, REITs allow investors to get involved in real estate with smaller amounts of money than required to buy properties. If you consider that on average a home in the U.S. costs $200,000 and a commercial property can cost much more, it’s easy to understand that building a diverse real estate portfolio would be expensive. REITs, on the other hand, allow investors to buy shares of a grouping of a diverse range of properties with a share costing as low as $100.

Investing in land, particularly buying a plot of land for a specific purpose, is nothing to take lightly. While it can offer big returns, it also poses big challenges and requires extensive planning. ETFs offer another path that might be right for those interested in getting their feet wet. Either way, investing in this finite resource is likely to pay off in the long run.

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The information and data are as of the January 28, 2021  (publish date) unless otherwise noted and subject to change. This blog is sponsored by Magnifi. This material is provided for informational purposes only and should not be construed as individualized investment advice or an offer or solicitation to buy or sell securities tailored to your needs. This information covers investment and market activity, industry or sector trends, or other broad-based economic or market conditions and should not be construed as investment research or advice. Investors are urged to consult with their financial advisors before buying or selling any securities. Although certain information has been obtained from sources believed to be reliable, we do not guarantee its accuracy, completeness or fairness. Past performance is no guarantee of future results. This content may not be reproduced or distributed to any person in whole or in part without the prior written consent of Magnifi. As a technology company, Magnifi provides access to tools and will be compensated for providing such access. Magnifi does not provide broker-dealer or custodial services.