A major investment benefit of owning alpacas is based on the concept of compounding. Savings accounts earn interest, which if left in the account, adds to the principal. The increased principal earns additional interest, thereby compounding the investor’s return. Alpacas reproduce almost every year, and about one-half of their babies are females. When you retain the offspring in your herd, they begin producing babies. This is “Alpaca Compounding.” Tax-deferred wealth building is another “Alpaca advantage.” As your herd grows, you postpone paying income tax on its increasing value until such time as you begin selling the offspring.

The following graph illustrates how a herd might grow in size over a ten-year period, assuming you begin with five pregnant females and two males. The herd growth depicted represents alpaca compounding at work. The initial herd grows to 126 ani­mals, assuming an 80% reproduction rate and a 50%male/50% female birth ratio. Not many investments appreciate at the same rate.

It should be noted that this graph, while clearly illustrating the principle of “Alpaca compounding” does not depict the average owners’ approach to alpaca ownership. Most breeders elect to sell all or some of the annual offspring production for practical rea­sons, such as recovering their initial cash flow, acreage and build­ing limitations, and time constraint