Gold vs. Equities: Is Investment In Gold Safer?
Gold has traditionally symbolised wealth and inheritance. Despite the rise of paper currency and more dynamic investment options like stocks, many investors still hold gold, especially during economic uncertainty. It protects against inflation and diversifies well. Equities, or stocks, have high returns but higher volatility and risk.
What is Gold Investment?
Gold’s durability makes it a popular choice for investors seeking stability. Gold coins, bars, and jewellery provide physical ownership, which can be comforting during economic downturns. Gold is an inflation hedge but does not pay dividends. It moves inversely to the stock market. Gold is an attractive investment portfolio balancer, especially in times of financial instability.
What is Equity Investment?
Buying stocks gives you fractional ownership in a company. Stockholders benefit from company growth through capital appreciation and dividends. Stock prices fluctuate due to many factors, making equity investments riskier than gold. Buy and sell stocks on the stock exchange to quickly adjust your portfolio because stocks are more liquid than gold.
Covid-19 Crisis Impact on Investments
Due to high demand, gold prices reached record highs during the COVID-19 pandemic. While Indian stocks fell 23% in March 2020, equity markets suffered. This stark contrast emphasises gold’s stabilising role during economic turmoil.
High Gold and Understanding Demand Gold-backed ETFs
Market volatility drove gold demand, increasing Gold ETF assets under management. Gold-backed ETFs allow investors to invest in gold without physical storage, with each unit representing 1 gramme of gold. ETF prices are based on Net Asset Value (NAV), but market dynamics can cause price fluctuations, especially during Covid-19 lockdowns.
Gold vs. Equities: Comparison
Gold is considered safer than equities due to its lower volatility and ability to hold value during economic downturns. Gold is stable, but stocks can generate income through dividends and capital gains. Stocks, however, are more volatile and closely tied to company performance, requiring more active management and risk tolerance.
Pros and Cons of Gold and Equity Investments
Gold is a reliable wealth store due to its stability and inflation protection. However, it generates little income and requires storage. While stocks offer higher risk and volatility, dividends can provide significant returns. Stock performance depends on company success, requiring careful research and monitoring.
Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.