In many countries, the interest rate for bank deposits remains low, so many people are looking for better investment options which will give them a reasonable return on their investment. Most people are also looking for a safe investment option so that they do not lose the principal amount they have invested. One of the main motivation for earning and saving money is that the investor should be able to access his or her funds whenever they require the money for a financial or medical emergency, so the investment should be liquid. This comparison of Gold versus stocks as an investment option compares the pros and cons of investing in gold and stocks.
One of the main advantages of investing in gold is the privacy or anonymity it offers for the investor. As gold is a commodity which can be melted into a different shape, there is no traceability and the government usually does not have any record of the amount of gold which an individual owns.
While the government is able to trace almost all the financial assets of a citizen in banks, stocks, mutual funds, property and seize it if required, in most countries the government has no records of gold, precious metals and stones owned by citizens. So in countries where corruption levels are high, gold is the preferred investment option for those who have money from illegal sources.
Another advantage of owning gold is that comparatively less research is required to purchase the gold and make a profit. The price of gold in the national and international market varies depending on a number of factors like the demand for the commodity, share prices, and the gold investor only has to choose the time for investing in gold.
On the other hand, for investing in stocks, a person has to do a lot of research on the company in which he or she is planning to invest money in shares, check the history, management, type of products or services the company is offering, competition and profit margin. This can be very time consuming for a person who is busy with other activities.
Gold can be easily carried physically from one country to another, especially if it is worn in the form of jewelry while it is not easy to move financial assets like shares easily from one country to another. The rules regulating the stock market vary from country to another, so if a person investing in stocks moves to another country temporarily for professional reasons, or permanently he may not be able to invest in the stocks in the country he was originally from. On the other hand, the gold jewelry can be easily melted and sold at a jewelry store or any gold dealer based on the weight and purity of the gold.
One of the major disadvantages of gold is that the price of gold will fluctuate and there is a possibility that the investor may make a loss. It is also easier to steal gold and more difficult to trace the stolen gold, as it may be melted. On the other hand, investors can choose between a large number of stocks if a particular stock or company is making a loss, so stock market investors have more flexibility compared to gold investors.
Liquidating physically gold for cash or money in the bank account is also more tedious, as a gold buyer will have to be found, while many people can liquidate their stocks from the comfort of their home, using their online trading account.