For some, choosing the best investments can be daunting. Deciding when and what assets to invest in might even drive new investors to make rash financial choices.
That’s why ensuring you have a diversified portfolio is crucial to the success of your efforts. Finding that balance is one of the reasons gold continues to shine as an investment option.
Keep reading to find out more about gold vs. stocks when it comes to the right investment opportunity for you.
The Value of Portfolio Diversifying
You might have heard how diverting funds away from a stock portfolio that’s making consistent returns is not a good way to maximize your money-making efforts.
But what happens when there are large market fluctuations? For most investors, portfolio diversification is an excellent option for hedging against serious declines in one asset.
Diversifying your investment portfolio with a well-chosen mix of assets can also lead to strong growth year over year.
Gold as an Investment
This is especially true when it comes to choosing gold as an investment. People have been investing in gold for centuries, and the long-term gains are still attractive to many investors.
Gold as a Defensive Asset
Gold has no maturity date or credit risk, which makes it an obvious choice for many investors looking to diversify.
Historically, gold performs well even when interest rates rise. It’s also a broadly chosen option for offsetting foreign exchange risk.
All of this makes gold an appealing defensive asset choice, but it also offers a solid portfolio growth opportunity.
Gold as a Growth Asset
Over the past 20 years, the World Gold Council has calculated that including gold as 2% to 10% of a portfolio boosted risk-adjusted returns over the long term.
According to the World Gold Council, whether you have a conservative, moderate, or aggressive portfolio, holding up to 10% of gold can result in year-over-year growth.
Stocks as an Investment
While typically seen as a higher risk, investing in stocks also comes with the advantage of higher yields when compared with lower-risk options.
Investing in the stock market requires a much more “hands on” approach than adding defensive assets like gold or bonds. You might want to hire a portfolio manager to keep a full-time watch.
Some investors do have great financial victories by buying the right stocks at the right time. But most tend to benefit from a diverse portfolio with a mix of high-risk and low-risk assets.
Defensive Stocks
The safest stock options tend to involve investing in an entire sector, as opposed to a specific industry or company.
Defensive stocks provide stable and consistent earnings via dividends, even when the overall stock market is in a downturn.
A few of the top defensive stock sectors are energy and utilities, healthcare, financial services, and raw materials production.
Growth Stocks
A riskier choice, but often more profitable in less time, growth stocks usually don’t pay dividends. Your earnings would come through capital gains when shares of the stock are sold in the future.
Growth stocks often look expensive due to trading at a high Price/Earnings ratio, but if the company grows rapidly, you could enjoy a large return when the share price is driven up.
Classic examples of top-performing growth stocks over recent years are Netflix, Apple, and Amazon.
Investing in Gold vs. Stocks
When it comes to deciding whether to put your money into gold vs. the stock market, you should consider whether you’re more interested in avoiding risk or making financial power plays.
You can think of investing in precious metals like gold as acquiring “safe haven” assets. Gold will protect your wealth, even in times of political or economic upheaval.
On the other hand, investing in stocks is a better option when it comes to an opportunity to increase your fortune via capital gains and dividends. Just be sure to keep potential risks in mind.
The Bottom Line on Gold vs. the Stock Market
Whether you choose to invest in gold or stocks, it all comes back to making sure your investment portfolio is diverse enough to serve your best monetary interests now and in the future.
Volatility in the stock market can cause even the most experienced investors to feel worried about their stock gains disintegrating on shaky fiscal ground.
Think of a diversified portfolio as an umbrella against the storms of the stock market. Ensuring you have a combination of stocks and gold will help you to avoid steep investment losses.
Adding Gold to Your Investment Portfolio
Thanks to being highly liquid, physical gold is a convenient and flexible way to balance your portfolio.
Simply choose which gold investment option works best for you:
- Gold bullion bars
- Collectible coins
- Gold jewelry
- Exchange Traded Funds (ETFs)
At Manhattan Gold & Silver, we’re happy to help you get started with adding gold to your investment portfolio. Our certified gold bullion bars offer you a quick and uncomplicated way to add gold to your list of investments today.
