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Should you invest in gold, stocks or both?

The best investment for you depends on your individual goals, risk tolerance and financial situation. Creativ Studio Heinemann

Investors have plenty of attractive options available to them. Gold and stocks have long been popular choices and both have proven lucrative in their own ways. But they also have their downsides.

Deciding where to invest your money can be tough, especially when it comes to choosing between two equally viable options. In this article, we'll explore the benefits of investing in gold, stocks and a combination of the two so you can make an informed decision.

Learn more about investing in gold by requesting a free information kit here.

Should you invest in gold, stocks or both?

Every investment comes with pros and cons. Here's how these particular assets can help your portfolio.

The case for gold

Gold is a wise investment for many reasons. Three big ones are:

  • Lower risk: The stock market is infamous for its volatility, which can wipe out an investor's portfolio overnight. By contrast, gold is a tangible asset that's been in demand for centuries, and its value doesn't depend on any one company's success. As a result, it's provided reliable returns throughout times of economic turmoil.
  • Stability: Gold has a low correlation to other asset classes, such as stocks and bonds. This means when other investments are performing poorly, gold can help balance out your portfolio and offset these losses.
  • Hedge against inflation: When the value of the dollar decreases, the price of gold usually increases, making it a valuable asset to protect against inflation.

The case for stocks

The benefits of investing in stocks include:

  • Potential for quick gains: Practices like day trading could yield you big returns in a short period, but they're risky and require a significant amount of research and analysis. While the average investor is best avoiding this practice, there's still the potential to net big gains if a stock you hold has a particularly good day.
  • Solid long-term returns: Historically, the stock market has returned 10% over the long term. This outperforms other assets, including gold. But to achieve this return, you need to hold onto stocks for years or even decades. Trying your hand at timing the market can result in catastrophic losses.
  • Dividends: Stock dividends can provide regular cash flow, which you can use to pay for expenses or reinvest for even more growth. Gold does not produce passive income, so you'll need to rely on appreciation alone to generate a profit.

The case for both

Ultimately, the key to successful investing is to build a diversified portfolio that balances the benefits and risks of various investment options. By combining different asset classes, you can maximize your potential for growth while minimizing your exposure to risk, no matter what the market conditions may be. Because their strengths and weaknesses can complement each other, it's smart to invest in gold and stocks simultaneously.

As a general rule, experts recommend keeping 5% to 10% of your investments in gold. For stocks, the ideal percentage is 100 minus your age. For example, if you're 30 years old, you should aim to keep 70% of your investments in stocks.

The bottom line

So, which one should you invest in — gold or stocks? There is no one-size-fits-all answer. The best choice for you depends on your individual investment goals, risk tolerance and financial situation.

If you're looking for a low-risk investment that can offer stability in a volatile market, gold may be your better choice. If you're willing to take on a little more risk in pursuit of higher returns and long-term growth, stocks may be the better option. That said, investing in both can give you the best of both worlds, so for many investors, that's the ideal solution. 

Each investment has its advantages and disadvantages, so educate yourself and seek the guidance of a financial expert. A financial advisor can help guide you based on your specific needs and priorities.

Explore your gold investing options by requesting a free investors kit online now.

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