Gold vs stocks

Stocks have long been seen as a popular investment method, offering high potential returns, but with high risks attached. Investment Gold, however, can offer a long-term, safer alternative. As a mixed portfolio especially, no investor should overlook the opportunities of gold versus stocks.

One of the key differences to consider with gold vs stocks, include the yield. Stocks will often produce an annual payment in the form of dividends, while gold's value is based solely on the metal itself when selling. These can prove to be small however, or non-existent if the company in question chooses not to pay a dividend.

Gold vs stock market

Gold is typically seen as a ‘safe-haven’- a lower risk asset that appeals to investors in times of economic or political crisis when they are more interested in investments that will protect their wealth rather than increase it.

Click here for more information about the benefits of gold as an investment asset.

In contrast, the stock markets are higher risk, higher yielding investment vehicles that are based on the growth and success of the companies being floated. Investors buy shares in certain companies, entitling them to a percentage of that company’s profits. The better the performance of the company in question, the
more an investor will earn from their investment. This can be a great tool for investors to put their money into assets that offer them a regular return and you might hear success stories about those who have bought the right stocks at the right times. However, for every success there is a failure and the possibility of
bankruptcy leaves investors vulnerable to the value of their stocks completely disintegrating.

Furthermore, when we compare the growth of the FTSE and the gold price over the last 20 years, there is plenty of reason to argue that gold is just as good an investment for those looking to increase their wealth in the long run. Gold is best seen as a long term investment and those who bought the precious metal 20
years ago and treated it as such will now be able to sell their investments for a significant profit.

Click here to see the historical gold price.

A major strength of gold is that its value isn’t affected by inflation in the same way that currencies are. An ounce of gold is always an ounce of gold. As the value of money fluctuates, the amount needed to buy that same amount of gold will change. As time goes on and fiat currencies become more and more inflated, gold’s value increases.

Although it’s hard to guarantee anything in the world of economics, the devaluation of currency is something that seems almost inevitable, while precious metals have remained highly valuable for thousands of years. In the last century ever major currency has lost 97-99% of its value relative to gold, with the remaining 1-3% seemingly only a matter of time.

Crucially, such a decline in a currency can occur very quickly. In the last year, the pound has lost 43% against gold while the Argentinian Peso lost 99% in just 16 years. On the other hand, if you had held gold for that period of time, your assets would have appreciated in value by a huge amount. Even if they hadn’t, they would still be worth something. This is the key difference between paper investments and physical assets such as gold and silver.

Related Links:

Is gold a safe investment? | Commodity Market | Gold as an investment

Gold price & interest rate relationship | Gold vs FTSE 100 | Gold vs ISAs