Detailed Comparison: Gold Investment vs. Stock Investment

This report provides a comparative analysis of gold and stock investments, highlighting their fundamental differences and market behaviors. It explains that stock investments represent ownership in companies (equities), while gold is a physical commodity. The report discusses how stock values increase with company profits, whereas gold's value rises with increased demand. It acknowledges the historical strong performance of stocks but also notes their vulnerability to market crashes and economic downturns. The report emphasizes the role of gold as a potential hedge against stock market losses, especially during crises, and recommends strategic gold investment, particularly during periods of inflation or market decline. It suggests a buy-and-hold strategy for gold and encourages investors to identify indicators of currency devaluation to optimize their investment timing. The report concludes by referencing relevant research and investment analysis sources.

GOLD INVESTMENT VS STOCK INVESTMENT 1
GOLD INVESTMENT VS STOCK INVESTMENT
Student Name
Institution Affiliation
Facilitator
Course
Date

GOLD INVESTMENT VS STOCK INVESTMENT 2
General perspective about Gold investment vs stock investment
Currently, statistics have indicated that many people are slowly becoming familiar with
precious metal investments like gold investment compared to some years ago where people were
only conversant with the traditional investment only, stock investment. The major difference
between these two investment categories is that stock investment is classified under the category
of “equities,” which means that stockholders own a portion of the company issuing the stocks,
gold investment is classified under “commodities,” to mean that the owner of the gold holds a
distinct, physical product (Chandra, 2017). When it comes to making money, another difference
between the two groups comes in; for the case of stockholders, money is made when the stock
ownership companies increase profits or improve the business standing leading to increased
demands for company ownership and a rise in the stock prices. On the other hand, gold investors
make money when gold demands increase hence causing “sport prices” for this metal to increase.
Current investment statistics have made people to believe that it’s easy for an investor to
be caught up by hype market stocks. This is because a long timeline indicates that on average,
stocks perform at a rate of 12.5% or more per year worldwide. For instance, a 30 year timeline
which has been drawn and which implies a 360% increase in portfolio investment plus the
compounded appreciation has clearly indicated that an investor will be crazy to even think of
investing in gold (Bredin, Conlon and Potì, 2015p.322).
Graphical relationship between Gold and Stock Investment

GOLD INVESTMENT VS STOCK INVESTMENT 3
But some investors are still investing on gold markets despite of the fact that stock
markets are doing well! This has been associated with the fact that stock markets are prone to
deeps (Raza, Shahzad, Tiwari and Shahbaz, 2016 p.300). For instance when a 30-40 year
timeline is taken to account, there has been several deeps like the 1987 Dow Jones crash, 1997
Asian financial crash, the 2001 Dot-Com Debacle and the recent financial crisis of 2008. Such
solid appreciations focus mainly on blue chip stock companies and which are the leaders in the
market hence affecting many investors. Because of these trends, stock market has been rendered
a hit or miss opportunity and hence making potential investors to diversify their investment
portfolio into gold (Basher and Sadorsky, 2016 p.240). According to different research studies,

GOLD INVESTMENT VS STOCK INVESTMENT 4
gold investment has been presented as a significant chunk investment portfolio because it can put
an investor in a position to recover whatever stock holding losses suffered after market crashes.
The differential line between these two types of investments is what winners hang on
during the times of stock market crashes and when they invest significant chunks of their
investment portfolio in gold, so that they can wait outside the market (Ratner and Klein, 2015).
The investors getting into the markets through marginal borrowing accounts or through other
forms of lending definitely expose themselves to panic because when the markets crashes begin,
they are forced out of the markets and locked out with their losses, many of them go bankrupt.
So, an investor positioning himself in gold to some significant extent will enable his or her
portfolio to easily recover from stock market crashes.
Recommendation
According to the history of many economies, the role of this precious metal has been
significant and although it lost its role as a primary currency, it is still a very solid and a long
term investment opportunity that can significantly add value to an investor’s portfolio especially
in bear markets (Ratner and Klein, 2015). Considering the fact that inflations will always be
expected from time to time and inflation times being the best moments for investing in gold that
makes it a good investment venture. Investors should therefore position themselves strategically
to detect any signs of inflation because those are the best times to invest in gold and expect to
reap high profits.
The leading indicators of future devaluation in the world currency are the declines in
stock markets and political turmoil. Also, when reserve banks announce to print more local
currencies is another indication that inflation is on the way and thus a good time to invest in gold

GOLD INVESTMENT VS STOCK INVESTMENT 5
(Ratner and Klein, 2015). So, generally gold investment is a good investment especially when
adopting the buy-and-hold passive investment strategy. Since current economies tend to be
cyclical, investors should consider buying gold when prices are down to ease the worry of
buying when other investors are also buying and driving the prices high.
References
Basher, S.A. and Sadorsky, P., 2016. Hedging emerging market stock prices with oil, gold, VIX,
and bonds: A comparison between DCC, ADCC and GO-GARCH. Energy Economics, 54,
pp.235-247.
Bredin, D., Conlon, T. and Potì, V., 2015. Does gold glitter in the long-run? Gold as a hedge and
safe haven across time and investment horizon. International Review of Financial Analysis, 41,
pp.320-328.
Chandra, P., 2017. Investment analysis and portfolio management. McGraw-Hill Education.
Ratner, M. and Klein, S., 2015. The portfolio implications of gold investment.
Raza, N., Shahzad, S.J.H., Tiwari, A.K. and Shahbaz, M., 2016. Asymmetric impact of gold, oil
prices and their volatilities on stock prices of emerging markets. Resources Policy, 49, pp.290-
301.
Smith, E.L., 2015. Common stocks as long term investments. Pickle Partners Publishing.

GOLD INVESTMENT VS STOCK INVESTMENT 6