Investing in Gold vs Stock Market - Play it Safe or Ride the Bull

gold vs stock market

Investment sources including traditional bank deposits, money-market funds, mortgages, bonds are associated with the conventional notion of being safe investment modes. However, as the conventional exercise motto goes; 'No Pain, No Gain', it's very much evident that almost each and every investment is subjected to a myriad of risks and contingencies, provided at various levels of relativity.

Considering Gold and Equity as two of the most potential and pervasive investment markets, investors often face this dilemma of which one to choose for investing their hard-earned money.

Needless to say, Gold has always been considered to be a marketable good since the advent of its importance and remains to one of the most alluring metals with a proposition for investment purpose. Considering the upsurge of recession way back in 2007, many of us transferred our funds from the equity market to gold trading for forestalling any type of further decline. Though the fact is true that the price of gold typically rises with the decline in stock market, it would not be prudent enough to consider Gold as the all-time ideal investment option when compared with equities. Following here is an overview of the difference of gold and stocks as two distinct investment instruments.

Safeguarding the Investor in times of an Economic Crash
Dexterous investors with rich market insights always consider gold as a means of protection during any type of economic tumult. On the contrary, in a similar situation of such economic collapse, stocks of many companies which, one would ideally invest upon might experience a significant decrease in prices. Thus, the scenario of the equity market will be quite frightful and shattered at that point of time.

Another striking advantage of gold over stocks is; the former acts as a tangible means of investment which, can be seen and touched. On the contrary, stocks are certificates which, signify the fact that the investor owns a certain portion of the company as an equity shareholder. It represents a specific percentage share of the organization, however, it often becomes difficult for the investors to decipher the actual value in the form of shares. Thus, in case the organization goes bankrupt or winds up, its issued shares will become completely worthless. On the contrary, gold is expected to retain some value as it is multidisciplinary in nature and cater to various other purposes apart from being an investment instrument.

Cash Flow
Investing in stocks generates steady cash flow, mostly in the form of dividends and capital gains. Furthermore, while investing in equity via mutual funds, the investor can yield steady capital gains at regular basis without even selling the shares. On the contrary, Gold does not equip investors with the opportunity of earning gains other than selling it. Moreover, gold investment will result in an outflow of cash, as you need to incur some expenses for storing and insuring it against accidental losses including theft.

Buying a bond, equity share or simply storing your funds in cash compels you to rely on the societal structure that it will provide a certain value. Furthermore, the value of Dollars is typically set against their ability only for buying other global currencies and due to many economic turbulence, its value might crash. On the contrary, buying a piece of gold ensures that it will ensure retain some historical value, irrespective of the societal background.

Self Contribution in Influencing Market Value
Equities are typically smaller denominations of the total market value of companies that constantly evolve themselves to equip customers with newer and better offerings, thereby influencing their brand value. The success or failure of a company is not solely dependent on the economic atmosphere but, also depend on how people will respond to it. On the contrary, Gold follows a reactive approach and cannot influence its value by itself since its market value is totally reliant on external forces.

Acceptance and Reliability
Gold enjoys the benefit of being a more comprehensible source of investment for average investors. Being a highly desirable asset, its value is being set on the open market, which is the only area of consideration for an investor to observe before investing. However, an equity investor requires an in-depth and clear perception about trends or flow of the capital market, nature and future prospects of the company on which you have invested upon.

Scope of Regular Returns
Investing in stocks helps investors to earn regular returns as in the form of dividends, which allow them to get their share in the annual profit of the company. On the contrary, since gold is an extremely liquidatable asset, it does not equip investors with such type of direct income as in case of investing in equity.

Asset Classification
Being absolutely diverse in nature, these two investment sources, gold and equities are classified under two different types of assets naming physical assets and financial assets respectively. Gold, being a conventional investment choice of the conservative and prudent investors, is considered to be a physical asset which, offers extensive financial safety and security, thereby serving as the safe haven for them. Moreover, it also assists investors in de-risking assets when the stock market is not working well. Concerning the equity market in this context, shares or stocks are typically classified as a financial asset which, ensure greater level of safety and security in terms of storage as they are saved in an integrated, electronic format. Furthermore, financial assets does not reflect any sort of value depreciation due to wear and tear. Their value majorly appreciates or depreciates due to the market conditions, financial policies and political shifts.

The Key Takeaway
Considering the economic landscape, gold has remarkably outperformed many assets of pivotal importance. Gold investment helps you in shielding your wealth with the possibility of the value of your purchase getting appreciated over time. While considering the equity market, on the other hand, it is extremely volatile and associated with a plethora of risks. Thus, before making an ideal investment decision, you must have a precise, clear perception about the risk return trade-off and evaluate whether the same will aid you in fulfilling your individual financial objectives.

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