Real Assets and Other Alternatives
Not every good investment is a stock or a bond — some of the most useful additions to a portfolio are physical or tangible things, and Singapore's own stock exchange happens to offer one of the easiest ways in the world to access one of them.
Real estate as an investment: REITs vs direct ownership
Real estate can be accessed two very different ways. Direct ownership means buying a physical property yourself — an apartment, a shophouse, a commercial unit — collecting rent and hoping the property appreciates. This requires a large amount of capital upfront, ties up your money in a single illiquid asset (recall liquidity risk from Lesson 7.3), and comes with hands-on responsibilities like maintenance, tenants, and financing.
A Real Estate Investment Trust (REIT) solves most of these problems: it's a company that owns and operates a portfolio of income-generating properties (shopping malls, offices, warehouses, hotels), and is legally required to distribute most of its rental income back to shareholders as dividends. Buying a REIT means buying shares of that company on a stock exchange — you become a part-owner of many properties at once, with none of the hands-on landlord duties, for as little as the price of one share, and you can sell your stake within seconds during market hours (unlike selling an actual building).
| Direct property ownership | REITs | |
|---|---|---|
| Capital required | Very large (a full property) | Small (one share) |
| Liquidity | Low — can take months to sell | High — tradeable instantly on exchange |
| Diversification | Low — one property, one location | High — many properties, sectors, sometimes countries |
| Management effort | High — maintenance, tenants, financing | None — professionally managed |
Singapore REITs (S-REITs): a local angle
Singapore has built one of the largest and most developed REIT markets in Asia, commonly called S-REITs. Well-known examples include CapitaLand Integrated Commercial Trust (shopping malls and offices), Mapletree Logistics Trust (warehouses across Asia), and Ascendas REIT (industrial and business park properties). S-REITs are popular with local retail investors partly because Singapore requires REITs to distribute at least 90% of their taxable income to shareholders in order to qualify for tax benefits, which typically results in relatively high and fairly steady dividend yields — a key attraction for investors seeking regular income rather than pure growth. Like any stock, S-REIT prices still move with property market conditions and, importantly, with interest rates: since REITs often borrow to buy properties, rising interest rates increase their borrowing costs and tend to pressure REIT share prices, which is worth remembering given Unit 5's coverage of central banks.
Commodities: gold, oil, agricultural products
Commodities are raw physical materials — gold, oil, wheat, copper — that can be invested in through futures contracts, commodity-tracking ETFs, or (for gold specifically) physical bullion. Each behaves differently: gold is widely used as a store of value and a hedge against inflation and crises (more on this below); oil prices are driven by global supply and demand, OPEC production decisions, and geopolitical events; agricultural commodities are influenced heavily by weather, harvests, and seasonal cycles. Commodities generally produce no income of their own (no dividends, no interest) — any return comes purely from price appreciation, which makes them fundamentally different from stocks, bonds, and REITs.
Infrastructure investing
Infrastructure investing means putting money into large-scale physical assets that provide essential services over long periods — toll roads, airports, ports, power grids, water utilities, telecommunications towers. These assets typically generate steady, predictable, contract-backed or regulated cash flows over decades (people need to keep using the toll road or the electricity grid regardless of economic conditions), making infrastructure attractive to large institutional investors like pension funds seeking stable, bond-like income with some inflation protection built in (many infrastructure contracts have fees or tolls that adjust with inflation). Direct infrastructure investing is typically accessible only to large institutions, though infrastructure-focused funds and some listed infrastructure companies offer retail investors partial exposure to the same theme.
Crypto: a brief, balanced treatment
Cryptocurrency refers to digital assets, such as Bitcoin and Ethereum, that exist on decentralized computer networks (blockchains) rather than being issued or controlled by any central bank or government. The bull case: crypto proponents argue it offers a form of money and value transfer independent of any single government or institution, potential protection against currency devaluation, and — for some crypto assets beyond simple currencies — genuinely new technological capabilities (such as smart contracts, which are self-executing digital agreements). The bear case: crypto has extremely high price volatility (Bitcoin has fallen more than 70% from its peak on multiple occasions), no cash flows or earnings to anchor a valuation the way a stock's profits do, meaningful regulatory uncertainty as governments worldwide are still deciding how to treat it, and a history of fraud and exchange failures within the industry. Where it "sits" in a portfolio, for those who choose to hold it at all, is generally as a small, high-risk, speculative allocation — most financial advisors who discuss crypto at all suggest limiting it to a small single-digit percentage of a portfolio precisely because of its volatility and the total-loss risk involved, not as a core or default holding.
Why might an investor add gold to a stock-heavy portfolio even if gold produces no income?
Reveal Answer
Because the value of adding gold comes from diversification and risk-reduction, not from the income it generates (recall from Lesson 7.1 that gold produces neither dividends nor interest — its only source of return is price appreciation). Gold has historically shown low or negative correlation with stocks during periods of crisis, inflation fears, or geopolitical instability: when investors panic and sell stocks, they have often simultaneously bought gold as a perceived "safe haven," pushing its price up while stock prices fall. This means a small allocation to gold can reduce a portfolio's overall volatility and cushion losses during exactly the periods when stocks perform worst, even though gold itself doesn't pay any income and may underperform stocks over long stretches of calm, rising markets. It's the same underlying logic as combining any two uncorrelated assets covered in Unit 7 — the goal isn't to maximize gold's own return, but to improve the risk-adjusted behaviour of the overall portfolio.