Gold Vs. Stock Market
While many investors prize gold above all other investments, others view stocks as the way to achieve long-term growth and wealth. What is right for you depends on your personal investment goals.
Protection in an Economic Crash
Many investors look at gold as a way to provide protection in the event of an economic crash. The thought is that if U.S. or another country's paper currency becomes worthless, gold will be used as an alternate currency. In a situation of total economic collapse, many companies in which you would own stock would probably go out of business due to the lack of paying customers. This type of scenario could render stocks worthless.
Gold is a tangible investment asset. It is an actual substance -- one that you can see and touch. Stocks are certificates that state you own a portion of the company, and while they represent a definite percentage of the company that issues the stock, it is more difficult for some investors to see actual value in the stock. A stock can become completely worthless if a company goes out of business; gold is likely to retain some value; it has uses other than as an investment vehicle.
Stock investments produce cash flow, often through dividends but also through capital gains. When investing in stocks through a mutual fund, capital gains income may come into the fund without selling the fund shares. Gold does not produce income until you sell it. Worse yet, gold will siphon cash flow from you, as you must pay someone to store the gold and you may have to pay insurance on the gold to protect it against theft.
Stocks represent investments in active companies that innovate and invent new products and services every day, building value. Companies are made up of people who are creative and look at challenges of markets and find ways to solve them. A company's success or failure is not made up solely of the economic climate, but more so in how people respond to that climate. Gold does none of these things as an investment. Gold is reactive and can do nothing to enhance its value. It is solely reliant on outside forces to either make or lose value.
Craig Woodman began writing professionally in 2007. Woodman's articles have been published in "Professional Distributor" magazine and in various online publications. He has written extensively on automotive issues, business, personal finance and recreational vehicles. Woodman is pursuing a Bachelor of Science in finance through online education.