Gold or stocks? If you're like many smart investors, you want to do your due diligence and research the various investment options out there to get the best bang for your buck.
So, which is better? Keep reading, and we'll lay out the information you need to help you compare investing in gold with investing in the stock market. Then, you'll be armed with the information you need to put your money to work helping prepare you for retirement, a large upcoming expense, having a sizable inheritance to pass on to your loved ones, or any of the various other reasons you're looking to increase your overall net worth.
Gold vs Stocks
What Does It Mean to Invest in Gold?
The most common meaning of investing in gold means holding physical gold coins or bars, either as a personal investment or in a Gold IRA. Since the value of your investment will be tied to the price of gold, as the price of gold increases, so will your portfolio.
What Does It Mean to Invest in Stocks?
Investing in stocks means you are purchasing an ownership share of the company. Public-traded companies are owned by all the stockholders, so when the company performs well, the price of the stock goes up and increases the value held by each investor. However, if the company underperforms, the stock price will decrease, and investors will see the value of their portfolio fall.
Investing in stocks seems straightforward: pick the right companies and see your portfolio grow. However, in reality, it isn't this simple. Other factors can cause the value of a stock to decrease, such as politics, changes in the company's management, and other economic factors. If you aren't properly trained for what to look for and aren't paying close attention, you could miss one of these indicators that a stock you hold is about to take a major downturn. And, let's be honest, we've all seen times when even the 'experts' got it wrong and missed a big market dip.
Is Investing in Stocks or Gold Better?
There are arguments to be made for investing in stocks and arguments to be made for investing in gold. Overall, it is good to hold a mix of both in your portfolio as this will ensure you are diversified and protect you should the stock market take a major downturn.
If all of your assets are in the stock market, you'll be much more vulnerable and more impacted in the event of a market crash. When some of your assets are held in gold or other precious metals, you won't be as adversely impacted in this scenario.
In addition to helping diversify your portfolio, investing in gold offers numerous other benefits. We'll outline these benefits in the next few sections. Gold, however, is not tied to the value of the dollar.
So, even with inflation, while the US dollar may lose purchasing power, gold can continue to grow and beat inflation, making it a great way to protection yourself and maintain your purchasing power in the future.
Hedge Against Inflation
With inflation, the value of the dollar goes down. Today, you can buy a lot less for $1.00 than you could in, say, 1950.
High Growth Potential
The potential growth for gold is very high. As a scarce commodity, there is a limited supply of gold on Earth. It is also a very highly-sought after precious metal across the world.
This combination can work in your favor to drive the price of gold up as more and more people are competing to get their hands on its limited supply. Gold is used for many things from jewelry-making, housewares, and even electronics. This should help you feel confident that the value of your investment will continue to rise in the coming years.
Easy to Liquidate
Having an investment doesn't mean much if you're not able to cash it in when you need the money. Consider a real-estate investment. If you suddenly need cash, if could easily take months to get your rental property ready to sold and have the sale close. By this time, it may be too late to get you the cash you needed when you needed it.
This is definitely not the case with gold. You should have no trouble finding a buyer for your gold. Since it is so valued and in high demand, there are many reputable gold dealers, both online and (likely) nearby your home.
Gold can last for centuries and can withstand a lot. For example, think about the gold coins or bars that have been found years later after a shipwreck. It most cases, your gold won't even melt in a house fire.
With gold, you don't need to worry about something happening to your investment. You can rest easy knowing your coins and bars will be there, ready and waiting when you need them.
Easy to Store
While it is very valuable, gold is also very compact. You could easily store hundreds of thousands of dollars in gold in a small safe. Of course, finding a secure storage solution outside of your home, such as a safe deposit box at a bank or a private company that offers precious metals storage, will be safest. But, even with these scenarios, you won't need to pay for a large storage area to hold your gold.
Likewise, gold is also very easy to transport. If you wish to bring gold with you on a trip, to give to someone as a gift, or for some other reasons, you don't need to worry about it taking up much space or being too heavy to transport.
Opportunity from Privacy and Independence from Infrastructure
While you can buy gold online, and it is often easier to do so, it is not necessary. If you don't want any transactions to show up under your name online, you can always purchase gold in person. This can provide you with greater privacy and limit the number of people who know you are holding gold, while also preventing your information from leaking out in the event of a hack.
Less Volatile than Stocks
If you've watched the stock market, or any one particular stock, you've likely noticed that one day the stock is up and the next it is back down again. This can not only be extremely frustrating as an investor, but it can also affect the overall growth of your portfolio.
Gold is less volatile than stocks. It won't be sent into a downward spiral simply because of one negative article about a company.
Also, with stocks there is the potential for your investment in a particular stock to suddenly be worth nothing. Unlike some companies that can fall and crash overnight, you won't need to worry about this happening when you invest in gold.
Gold offers a very stable investment. Over the past three decades, its value has increased by around 550%. Think about what this can mean for your financial prospects over the next several years.
No Need for Special or Technical Knowledge
Gold is a simple and straightforward investment. You can pretty much purchase the gold pieces you want, hold them in your portfolio, and wait until you're ready to cash in on your investment.
Investing in stocks can almost be a full-time job. You need to stay on top of updates about the company, look for news stories that could impact the value of a particular stock, stay on top of hirings and firings of new CEO's and more. Then you need to evaluate the information you learn and decide whether you should sell a particular stock, purchase more, or stay where you're at. This can all be very tiring.
However, even with spending all this time trying to stay on top of things, it is still easy to miss something, which could be catastrophic for your portfolio.
Not Highly Impacted by Politics
Another benefit of investing in gold is that it is not as impacted by politics as stocks can be. If you've noticed, announcements made by politicians can cause the stock market to climb, or to fall.
Additionally, policies laid out by politicians can also impact the price of a stock. More regulations placed on different industries could lead to that well-performing stock in your portfolio to take a major downturn.
Valued All Over the World
Finally, gold is highly sought-after in all parts of the world. If you need to bring your gold with you when traveling, you should have no problem finding a buyer and receiving the country's local currency in exchange for your gold.
As you can see, there are a lot of compelling reasons to add gold to your portfolio. A well-balanced investment portfolio should contain a mix of both gold and stocks to offer you the greatest diversification, protection against stock market volatility, and opportunity to take advantage of the many benefits associated with investing in gold that we outlined above.