Is Gold a Better Investment Than the S&P 500?
Gold has an extremely low correlation to stocks, making it an effective hedge against higher-risk growth investments.
Investors seeking long-term growth should consider investing in stocks. When making investment decisions, however, it’s essential to take your priorities and risk tolerance into consideration when making these choices. In this article we explore both gold and stocks from both perspectives – their benefits and drawbacks will be explored further in depth.
1. It’s a store of value
Gold has significant value as an inflation hedge and to protect against stock market declines, providing investors with a reliable store of wealth during uncertain times. Gold makes for an ideal retirement plan asset and acts as an important safeguard against inflation and stock market instability.
History has taught us that when economies collapse or world affairs become volatile, investors seek out gold as an investment safe haven – which explains its resurgence during natural disasters, wars, and hostile political environments.
As such, many portfolio managers believe gold should be part of every investor’s arsenal. But whether or not adding it depends on your priorities and time horizon. With SmartAsset’s free tool matching you up with certified financial advisors who can develop an investment plan tailored specifically to you needs.
2. It’s a hedge
Gold has traditionally been seen as a hedge against inflation, depreciating currencies, and stock market instability. When facing economic uncertainties, many investors seek diversification by way of gold investments.
Gold may not be an immediate solution against inflation, but over the long-term it can protect purchasing power. According to data from the World Gold Council, gold has outshone both price and money supply inflation since 1971.
As part of your retirement investment portfolio, it is crucial to select assets with steady returns while mitigating risk. At Birch Gold, we are dedicated to helping our customers diversify their retirement portfolios with precious metals like gold and platinum – ask about them by requesting our free information kit now!
3. It’s a diversifier
Some investors consider gold an effective means of diversifying their portfolios during times of economic instability or market instability, as the commodity tends to thrive during such instances.
Critics contend that investing in gold may result in lower returns than investing in stocks or bonds due to its lack of dividends which compound over time and generate additional returns over time.
Gold does not follow the rise and fall of stock and bond markets like other investments; rather, it moves at its own pace – helping reduce overall portfolio volatility. To learn more about investing in gold as an effective diversifier, request your free information kit today.
4. It’s a hedge against inflation
Gold’s most attractive feature is its ability to act as a powerful hedge against inflation. Real interest rates currently are at record low levels and could remain that way, providing gold with an ideal environment in which it can thrive.
But gold’s track record as an inflation hedge is mixed at best. Although gold proved useful during periods when inflation rates reached double-digit levels (such as during the 1970s, when annual inflation hit double digits), during other high inflation times such as UK or COVID-19 pandemic pandemic of 2020-2021 it failed to outwit stocks or cash in banks as an inflation hedge.
investors seeking protection against inflation should instead look at Treasury Inflation-Protected Securities (TIPS). These bonds offer a fixed rate that adjusts to match inflation; TIPS are widely available at brokerage firms.
5. It’s a hedge against the stock market
Gold may not pay dividends and can’t compound, but its low or negative correlation to equities suggests it may provide value as a diversifier. For instance, during the sell-off prompted by Covid-19 pandemic in early 2020, gold prices held up well and demand actually increased 28% year-over-year according to the World Gold Council.
Should You Include Gold In Your Investment Portfolio? A qualified financial advisor can assist in this decision. SmartAsset’s free tool connects you with up to three vetted advisors in your area who you can interview at no cost before making your choice. Get started now.