Han Dieperink: Real assets without real returns

October 10, 2025

Gold

_{This column was originally written in Dutch. This is an English translation.}

Gold glitters, but it doesn't generate growth. Why tangible security can be an expensive illusion.

By Han Dieperink, written in a personal capacity.

The human tendency to desire what we can touch is deeply ingrained. In uncertain times, investors seek comfort in the tangibility of property and the lustre of gold. You can see, feel and touch a house, whereas your investment in shares may not feel real. This preference for real assets seems logical. Real estate is still there, even when the stock market crashes. Gold retains its lustre, regardless of economic storms. But this apparent certainty comes at a price. Safe assets can deliver disappointing returns in the long term.

The problem lies in the fundamental difference between scarce and productive assets. Scarce assets, such as gold, diamonds and even land, derive their value from their rarity. However, they do not produce cash flows and do not generate economic added value. Their return depends entirely on what someone else is willing to pay for them tomorrow. It is the “greater fool” theory: it is worth what the fool will pay for it. Productive assets, on the other hand – companies, patents, technologies – actually create value. They solve problems, increase productivity and generate cash flows. Crucially, these assets can reduce the scarcity of other goods. An innovative company can develop alternatives to scarce raw materials or invent more efficient production processes.

Over a 30-year period, up to April this year, S&P 500 shares had an annualised total return of 10.3%. Real estate achieved 8.8% and gold only 7.4%. This difference may seem small, but the effect of compound interest makes it enormous over decades. It is not for nothing that Einstein called compound returns the eighth wonder of the world. More importantly, shares offer diversification. When you talk about shares, you are not talking about one large asset. You are talking about thousands and thousands of companies doing different things. History has shown time and again that human innovation overcomes scarcity. When oil seemed to be running out, entrepreneurs developed fracking techniques that unlocked huge new reserves. When labour becomes expensive, companies automate their processes. This dynamic ensures that productive assets can replace scarce assets or undermine their value. And the era of artificial intelligence has only just begun.

Investors who rely solely on scarcity underestimate human adaptability. They bet on a static world when they actually live in a dynamic economy where innovation constantly creates new opportunities. True financial security lies not in the possession of tangible objects, but in the ownership of systems that create value. A gold bar does not generate income, but a profitable company does. Real estate in a shrinking region loses value, but an innovative company can adapt and grow. This does not mean that real assets have no place in a portfolio. They can offer diversification and protection against specific risks. But the illusion that real assets should form the basis for long-term wealth is dangerous. True prosperity comes from ownership of the forces that drive our world forward, not from clinging to symbols of scarcity in a world of abundance through innovation.