Gold, REITs and InvITs: the other building blocks

Between the equity you own and the bonds you lend lies a third shelf of instruments that most Indian investors meet by accident rather than design. Gold, in this country, is practically a reflex. Property is the dream nearly everyone is sold. And infrastructure — roads, power lines, pipelines — quietly underpins the economy but felt, until recently, impossible for an ordinary person to own. This chapter is about owning all three sensibly: gold without the locker, and property and infrastructure without the crores or the headaches.

Why hold gold at all

Indians need no encouragement to buy gold — but most buy it for the wrong reasons and in the worst form. So let's be clear-eyed. Gold is not a productive asset. A share represents a business that earns; a bond pays you interest; a flat earns rent. Gold does none of that. A kilo of gold today is the same kilo in twenty years, throwing off no income whatsoever. Its entire return depends on someone later paying more for it than you did.

So why hold any? Because gold tends to behave differently from stocks and bonds — it often holds or gains value precisely when equities are falling, when inflation bites, or when the currency wobbles. That low correlation makes a modest gold sliver a useful diversifier and shock-absorber, not an engine of wealth. It's portfolio insurance, not a growth bet.

Owning gold the modern way

If gold earns its small place as a diversifier, hold it in a form that's cheap, pure and easy to sell — which means, for most people, not physical metal at all.

• Gold ETFs — exchange-traded units, each backed by physical gold of standard purity, that you buy and sell in your demat account at near-live prices. No locker, no making charges, easy to exit.
• Gold mutual funds (fund-of-funds) — invest in a gold ETF on your behalf, so you can buy them without a demat account and even run an SIP into gold.
• Sovereign Gold Bonds (SGBs) — government securities denominated in grams of gold; you get the gold price movement plus a small fixed interest, with no storage worry. (Issuance terms and availability vary over time, so check current details before relying on them.)

REITs: owning property without buying a flat

Property is the asset Indians most want to own and most struggle to own well. A flat costs a fortune, ties up your capital in one undiversified lump, can take months to sell, and saddles you with tenants, repairs and paperwork. A REIT — Real Estate Investment Trust — was designed to solve exactly this. It's a SEBI-regulated, listed vehicle that owns a portfolio of income-producing real estate — typically large commercial properties like office parks and malls — and lets you buy a unit of it on the stock exchange, just like a share.

The mechanism is elegant. The REIT collects rent from its tenants and is required to distribute the bulk of that income to unitholders regularly. So you, holding a few units bought for a modest sum, effectively become a tiny landlord of a giant office complex — collecting your slice of the rent — without ever signing a lease, fixing a leak or chasing a tenant. And because it's listed, you can sell your units in seconds, something no physical flat can offer.

InvITs: the same idea, for infrastructure

An InvIT — Infrastructure Investment Trust — is the same financial idea pointed at a different asset. Instead of office buildings, an InvIT owns operating infrastructure: highways that collect toll, power-transmission lines that earn fees, gas pipelines, telecom towers. These assets produce long, predictable cash flows, and the InvIT pools them and distributes most of the income to unitholders, exactly as a REIT does with rent.

Both REITs and InvITs share a common appeal: they convert big, illiquid, hard-to-access real assets into small, listed, tradable units that throw off regular income. For an investor who wants exposure to property or infrastructure — and the steady, rent-like cash flows they generate — without the capital, illiquidity and operational grind of owning the assets directly, they fill a genuine gap between equities and bonds.

Where these fit — and where they don't

Think of gold, REITs and InvITs as supporting players, not the lead. For the overwhelming majority of long-term investors, the core of the portfolio is still a low-cost equity base for growth and high-quality bonds for ballast — the building blocks of the earlier chapters. These alternatives earn their place at the margins: a little gold for shock-absorption, a measured slice of REITs or InvITs for diversification and income from real assets you'd otherwise never touch.