Gold vs Stocks: Which is Best?

gold vs stocks

If you’re interested in buying gold, chances are you’ve dipped your toe into stock market investing as well. 📈

Both types of investing have many similarities and differences, and investors have strong opinions about which one is best and for what reasons. At Minted, we believe that everyone should have some gold – but that doesn’t mean that you shouldn’t hold some stocks too. In this post, we cover some of the similarities and differences between the stock market and gold investing.

Gold and stocks similarities

Both gold and the stock market are assets that are centuries old and have played a big role in the development of humanity. Gold is quite a bit older, with the first discovery as far as 40,000 BC and it first being smelted in 3600 BC. The stock market was invented by the Dutch and the first one was founded in the early 1600s.

Both gold and stocks are well-known methods of managing your wealth, and both can be seen as long term investments – although some may prefer to trade stocks and make a profit by timing the market. The other similarity is that both gold and stocks are highly liquid assets: you can sell your stocks and get the cash in a few days, and the same goes for gold.

Really, that’s where the similarities end – most people prefer owning both stocks and gold for that exact reason: they are different. Here are a few ways how:

Gold 

Stocks

Lower returns                                   

High returns 

Low risk

High/medium risk

Physical asset

Paper asset

Beginner knowledge

Medium knowledge

Pay capital gains tax

Invest through ISA

Gold vs the stock market

Return

In general, stocks tend to offer high returns, but this does depend on how you invest. You can choose to pick your own stocks based on your own knowledge, outsource the management to someone else (fund managers) or invest in low-cost index funds and ETFs. Your return will vary depending on the method you pick to invest. You may make high returns picking your own stocks, but you could also lose a lot of money. You can also receive an income with stocks through dividends.

Most people don’t buy gold in order to make huge returns – just enough to beat inflation and steadily grow their wealth. That’s because gold is a safe haven asset that keeps your money safe, rather than makes monster profits. Gold returns are quite volatile and vary from year to year. For example, through the uncertainty of the coronavirus pandemic, gold has made an impressive return of almost 26%. This is higher than the stock market, which returned 8.6% so far on the S&P 500. In general, gold returns more than 2% every year on average, beating inflation.

Risk

With higher rewards, comes higher risk. The stock market is considered riskier than gold. When you pick your own stocks, you can lose a lot of money if a company goes bankrupt or simply gets bad publicity. You can also lose quite a lot when there’s a stock market crash – which is why people sell as quickly as they can when there’s an impending crash. Having said that, the risk does vary depending on how you invest; low-cost index funds aren’t considered as risky since you spread your investments across various industries and countries.

Gold is a safe haven asset, so it’s low risk. This is because it’s one of the oldest human investments and it even used to be a currency itself. It’s also one of the rare assets that you can hold in your hand, which gives you the peace of mind that you still have money even if banks stop issuing cash or there is severe inflation – such as what happened in Argentina or Greece. The only risk that comes with gold is if you decide to store it at home instead of in a third party safe. If you decide to keep it at home, make sure to store it properly with the right tools.

Knowledge

Another key difference between the two assets is the knowledge required to get started. With the stock market, some minimum knowledge is required if you want to pick your own stocks. Even if you invest in low-cost index funds, you need to know which fund fits your objectives best and make sure you don’t overpay in fees. If you decide to outsource to an expert fund manager, your return may be drastically lower due to high fees.

Gold is straightforward: everyone knows about gold! With gold, there’s not much you need to know (although it’s always good to do some research). There’s no need to time the market or try to buy when the price is low – you’re buying for the long term, not trying to make a profit. The main thing you want to make sure is to keep the fees you’re paying as low as possible, including insurance, storage and dealer fees.

With Minted, we pride ourselves on being one of the cheapest dealers in the market:

minted fees

Taxes

Both stocks and gold are taxed based on capital gains. That means that you’re taxed on the profit you make from each asset.

With the stock market, that means that you pay taxes when you sell your assets. However, if you invest through an ISA, you can invest £20,000 tax-free every single year.

With gold, you also pay capital gains taxes, but only if you make a profit of more than £12,000 in one year (this is for all asset sales, not just gold). As you can imagine, it’s highly unlikely to make this much profit with gold, so most people don’t need to pay taxes. In addition to that, gold buyers don’t pay VAT on gold, whereas they do with silver!

Both gold and stocks have a place in your portfolio: one stabilises your investments while the other grows their value over time. Gold will also give you that peace of mind that your wealth is stored somewhere safe and give you the confidence to keep saving your money no matter how uncertain the world is.

Want to learn more about gold? We publish a tonne of resources to help you get started on your gold journey! 👇

Araminta Robertson

Araminta Robertson

Araminta is a financial writer and self-professed Fintech nerd. She likes writing about investing, the future of payments and of course, gold.
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Disclaimer: Gold prices can fluctuate over time and may increase and decrease. The Minted App Ltd does not accept any responsibility for any loss caused by information provided on the website. Minted is not an investment advisor and recommends doing research before making a purchase.