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. Most breeders elect to sell all or some of the annual offspring production for practical reasons, such as recovering their initial cash outlay, acreage and building limitations, and time constraints.

Alpacas are also fully insurable against theft and mortality. Insurance can be purchased for your stock regardless of age. Average insurance rates are 3.25% of the value of the animal, or $325 for every $10,000 of insurance.

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

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