Gold Vs Stocks

Gold Vs Stocks

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.

Difference Between Assets and Liabilities

Difference Between Assets and Liabilities

In order to understand the difference between assets and liabilities, it is important to begin by defining the terms. An asset refers to any possessions that contain a substantial monetary value that a company can trade for cash in order to offset its outstanding debts. Examples of assets include cash at hand, cash in the bank, motor vehicle, machinery et cetera.

On the other hand, a liability refers to the extent to which a company or organization may be called upon to meet its outstanding financial debts. One of the most common types of liability is creditors. There are various types of liability depending on the extent of obligation involved as well as the timeline within which the said obligation must be met.

Types Of Assets And Liability

The difference between assets and liability also manifests in their various types. Assets can be classified into either tangible and intangible or current/liquid and fixed. Tangible assets are the physical possessions a company has including but not limited to vehicles, machinery, inventory as well as lands and building. On the other hand, intangible assets refer to a company’s possessions that reserve monetary value but that cannot necessarily be seen or touched, such as patents, Accounts Receivables and contracts.

Assets are also classified into fixed and current assets. Current assets are those that a company can sell, consume or convert into cash within a period of 12 months. They include things such as cash at hand, perishable food commodities et cetera. On the other hand, fixed assets refer to those assets that a have a lifespan of at least a year. Lands, buildings and machinery all fall under this category.

Just like assets, liability also takes different forms. Liability can either be grouped based on the extent of obligation involved or the timeline within which the said obligation has to be met. When it comes to the extent, we have limited and unlimited liability. Limited liability is when a company may be called upon to meet its debt obligations but within a specified sum of money.

Limited liability is often determined by the amount of a business or company’s share in an investment. On the other hand, unlimited liability occurs when a business or company is called upon to meet its debt obligations, where this extent is expressed as infinite. This basically means that if a company owns another company, group or organization, it is liable to meet all the outstanding debts without necessarily distributing it based on the number of shareholders it has.

Another way liability can be classified is with regards to the timelines and here, we have current/short-term and long-term liability. Current liability refers to the debts a company owes that can be paid off within a period of 12 months. They include short-term loans, payday loans etc. On the other hand, long-term liability refers to debts that a company can only pay off after a period of 12 months and the most common ones are long-term loans.

Conclusion

Evidently, the only way to understand the difference between assets and liabilities is by exhausting each term individually. On a concluding note, the easiest way to identify assets and liability is to take any bookkeeping statement such as a balance sheet.

All the variables recorded on the left-hand side are assets while all those recorded on the right-hand side are liabilities. The difference between the two equals the company’s equity, or in simple terms capital.