Investments

January 2026

By Damon Frith, NAB Wealth Editor

The investible universe can be divided between financial and real assets. Financial assets encompass instruments such as shares, bonds, and derivatives that represent potential future cash flows. In comparison, real assets derive their value from their physical characteristics and intrinsic value. They are often essential to the functioning of economies and understanding real assets is vital for investors seeking diversification, inflation protection, and long-term stability.

Defining Real Assets

Real assets are physical or tangible resources that hold intrinsic value. For example, a piece of farmland has value because it can produce crops, irrespective of financial market conditions. Similarly, a bridge or airport generates economic activity by enabling transportation and trade.

This distinction makes real assets particularly attractive in times of financial uncertainty. While financial assets can be volatile and influenced by market sentiment, real assets have the potential to provide stability, income, and a hedge against inflation.

Categories of Real Assets

The main categories of real assets can be grouped as follows:

Why Real Assets Matter

Real assets play a unique role in investment portfolios. Their tangible nature provides several advantages:

• Inflation Protection: Because real assets often rise in value when the cost of goods and services increases, they may serve as a hedge against inflation. For instance, real estate rents and commodity prices typically adjust upward during inflationary periods.
• Diversification: Real assets behave differently from financial assets, reducing overall portfolio risk. Infrastructure, for example, tends to generate steady cash flows even when equity markets are volatile.
• Income Generation: Many real assets provide ongoing income. Real estate yields rental payments, infrastructure projects generate tolls or utility fees, and farmland produces crops.
• Intrinsic Value: Real assets retain value through their physical existence. A gold bar or a parcel of land will retain some worth, regardless of market conditions.

Examples in Practice

• Real Estate: Investors purchase residential property, warehouses or office buildings to earn rental income and benefit from property appreciation. Real estate investment trusts (REITs) make this asset class accessible to smaller investors.
• Infrastructure: Superannuation and sovereign wealth funds often invest in toll roads, airports, and energy grids. These assets provide long-term, predictable returns aligned with their liabilities. Options for private investors to access include ETFs, mutual funds or direct investing in publicly listed companies and utilities involved in the sector.
• Natural Resources: From minerals extraction to renewable energy and utilisation of other resources that are essential for modern life and economies globally. Options include ETFs, listed companies, futures and more rarely, physical holdings.
• Precious Metals: Gold is often considered a “safe haven” asset. During financial crises, investors tend to flock to gold as a store of value.
• Collectibles: Individuals may invest in fine art or rare wines. While subjective in valuation, these assets can appreciate significantly due to scarcity and cultural demand.

Risks and Considerations

Despite their appeal, real assets are not without challenges:

• Illiquidity: Many real assets, such as infrastructure or farmland, cannot be easily bought or sold. Transactions are complex and time-consuming.
• Management Costs: Physical assets require maintenance. Real estate needs repairs, machinery depreciates, and natural resources have extraction costs.
• Market Cycles: Commodity prices fluctuate with global demand and supply. Real estate values can decline during economic downturns.
• Valuation Complexity: Unlike stocks with transparent market prices, real assets often require appraisals or specialized expertise to determine fair value.

The Strategic Role of Real Assets

For investors, real assets are not merely alternatives—they are strategic holdings. They provide resilience against inflation, diversify risk, and anchor portfolios with tangible value. Institutional investors, such as pension funds, often allocate significant portions of their portfolios to infrastructure and real estate for precisely these reasons.

At the individual level, owning a home, farmland, or even gold coins represent participation in the real asset universe. These holdings can serve as both financial security and a hedge against uncertainty.

Conclusion

Real assets are the backbone of economies and a cornerstone of resilient investment strategies. From the farmland that produces food to the bridges that connect cities, these tangible resources underpin daily life and global commerce. For investors, they offer stability, diversification, and protection against inflation.

In a world where financial markets can swing wildly, real assets remind us that value can be grounded in the physical and enduring. Whether through real estate, infrastructure, natural resources, or collectibles, real assets remain essential to building wealth and safeguarding it across generations.

To discover more call 1300 683 106 or email us on investordesk@nab.com.au

The information contained in this article is believed to be reliable as at January 2026 and is intended to be of a general nature only. It has been prepared without taking into account any person’s objectives, financial situation or needs. Before acting on this information, NAB recommends that you consider whether it is appropriate for your circumstances. NAB recommends that you seek independent legal, property, financial and taxation advice before acting on any information in this article.

©2026 NAB Private Wealth is a division of National Australia Bank Limited ABN 12 004 044 937 AFSL and Australian Credit Licence 230686.

Investments