What are Real Assets in Alternative Investments?
What is Real Assets?
Real assets are tangible investments with intrinsic values due to the nature of their physical properties. They are essential to the diversification of investment portfolios as they have a relatively low correlation with financial assets, and provide a more stable investment that also works as an inflation hedge.
Also, they often provide a predictable and steady income stream for investors. However, investors need to also take into consideration the illiquid nature of real assets and their higher carrying costs.
Types of Real Assets
Real Estate
Commercial, residential, and industrial properties that generate income through rent or appreciation.
Infrastructure
Essential facilities and systems serving communities, including transportation, utilities, and communication networks.
Natural Resources
Commodities like timber, agriculture, oil, gas, and precious metals with inherent value.
Collectibles
Art, wine, classic cars, and other items that appreciate in value over time.
Benefits of Real Asset Investments
- Inflation protection through value appreciation in line with rising prices
- Portfolio diversification with low correlation to traditional financial assets
- Stable income generation through rent, leases, or usage fees
- Tangible value that tends to be more resilient during market downturns
- Potential tax advantages through depreciation and other deductions