Investing in Gold vs S&P 500: Which Is Better?

There are a multitude of ways to invest your hard-earned money. With so many potential investment opportunities, it can be challenging to know which one is best for you. No one way is the right way.

What’s suitable for one individual depends on their personal goals, how invested they want to be, and how quickly they want to grow their money. There are long-term and short-term options, precious metal investments, and various stock indices, including gold vs. S&P 500.

Contact the Oxford Gold Group today for more on investment options, including a complete precious metals investment guide.

Stock Indices

woman adding stock index notes in her tablet

When most people think of investing, they naturally think of investing in specific stocks and the potential to earn or lose money in those stocks. Every investor understands that the more valuable a company is, the more valuable the stock. The difficulty lies in knowing which company or stock will give you the best return on investment.

With the market crowded with indices meant to summarize and measure stock growth over time, it can still be challenging to know where to start. Today’s top indices include the Dow Jones Industrial Average, the Standard & Poor’s 500 Index (S&P 500), and the Wilshire US Large-Capitalization Index, to name a few.

Indices are rated by how they represent the market. As a result, indices vary depending on the number of companies represented under their umbrella and whether they measure growth in price or total return growth.

Each company under the index umbrella is weighted differently, having different levels of impact on the growth of the overall indices. Companies weighted less have less impact on the overall growth than those that carry more weight.

Investors view the S&P 500 Index as the index most representative of the U.S. Stock Market is the S&P 500. The S&P 500 is an index of 500 of the largest publicly traded U.S. companies, spanning all industries. Founded in 1923, it is one of the oldest, most trusted, and followed indices worldwide.

Precious Metals

Precious metals gave investing, as we know it, its start. Companies, and therefore stocks, may come and go, but precious metals such as silver and gold will remain. For this reason, many investors consider precious metals a staple in any portfolio.

The most successful investors include precious metals in their portfolios. Many might say that their portfolio is successful because they rely on precious metal investments to protect and balance out their potential losses.

Precious metal investments include gold, silver, platinum, and palladium. The universal use and functionality of the metal, the desire for the metal, and the essential supply and demand determine the various values for these metals. These metals have value because they are strong as well as malleable.

In addition, gold has no credit value associated with it and earns no interest. As a result, it is a trusted source and brings legitimacy to other countries and currencies. As one might guess, gold is the long-time leader in precious metal values and is currently in high demand.

Investment Growth: Stocks vs. Metals

gold bars on top of stock index data

Companies come and go, product trends fade, and world affairs are unpredictable. Stocks and gold naturally rise and fall, with these changes affecting the nation’s economy.

The economy declines when stocks drop and vice versa. Investors often sell their stock to prevent substantial losses when this occurs.

When the economy drops, savvy investors exchange stocks for precious metals due to their reliability as an economic and investment stabilizer. The value of precious metals does not swing as widely on the pendulum as stock prices may. As a result, growth doesn’t rise as high as quickly, but then again, the losses aren’t nearly as detrimental.

Gold vs. S&P 500 Index

It goes without saying that not all investments rise and fall at the same rate. Often, but not always, when one is on the rise, the other is on the decline. Comparing growth relationships between opposing investment strategies such as gold and the S&P 500 requires comparing growth over a long period of time.

Most precious metal investors believe that if you look at any gold growth chart since 1970, it will show that gold growth consistently outpaced stock growth. It is possible to trace this trend to specific dips in the economy where investors purchased gold and sold stocks to protect themselves.

Although stocks did not double in growth, investors were still able to earn dividends from those stocks. They then reinvested those dividends back into the stock market, increasing their investment and expanding their portfolio.

Gains from quarterly reinvestments can be game changers if appropriately managed. Compounding growth is stacking growth on top of previous growth and further prior growth. On the other hand, while steady and reliable, gold cannot be compounded.

In addition to compounded growth resulting from reinvested dividends, stock growth means ownership growth. Since stocks reflect partial ownership in a company, investors’ ownership size increases every time that stock earns dividends that are reinvested.

These facts may sound like a slam dunk for investing in the S&P 500 over gold; however, as already stated, nothing in business lasts forever. Companies come and go, and with them go their stocks. Owners without diverse portfolios risk huge losses when these types of changes occur.

Gold is a commodity desired and valued across the globe. As long as investors value gold as an economic stabilizer, they will continue trading gold. Odds are, if you buy gold in your 20s, you will still have your gold well into your retirement years, regardless of what happens to the economy.

The exception to all of this would be in times of significant market crashes vice mere dips or declines. When markets crash, it is all hands on deck to continue funding industry businesses. Investors are likely to sell off gold in addition to their stock to remain afloat.

Which Is the Better Investment?

woman thinking gold vs sp500 investments

The answer to this question depends on the investor; however, most experienced long-term investors will tell you that diversification is critical for any portfolio.

Gold may be steadfast and true, but stocks can earn quick dividends, which you can use for reinvestment and increasing earnings.

In addition, stocks are easily tradable. When specific stocks show signs of decline, investors can sell and purchase new, trending stocks with a simple phone call. But with that easy trade comes risk, as there is no guarantee that any single stock will be successful.

Gold prices are windows to the state of the world. The price of gold rises with natural disasters, wars, and hostile political climates. With gold as an early warning, intelligent investors can dump stocks to purchase gold and hedge their losses during these declines.

Central banks, such as the Federal Reserve, purchase gold to hedge against economic declines. Gold does not earn interest or dividends. Instead, the value of gold comes from its physical presence.

When to Buy and Sell

Whether selling stock and buying gold or the other way around, watching trending prices for the opposing investment strategy is crucial. This idea may seem obvious, but stock owners often overlook this simple rule, for example, when they look solely at the rise and fall of their stock to determine strategies for buying and selling.

Since gold vs. S&P 500 investments are relatively opposite, the other is down when one is up. If stocks are up, gold prices are generally low and undervalued. This decline in gold value is a good time to invest in gold.

The opposite is also true. If values for gold are up, then stock prices are likely to be down, making it an ideal time to invest in stocks.

The relationship between gold and the U.S. dollar follows the same logic. When the dollar is high, gold value is down, making it an excellent time to purchase gold.

This tip is significant for those looking to diversify their investment portfolios. While your stocks are up, diversify your precious metals and vice versa.

Invest and Diversify with Precious Metals

different eggs depiciting investment diversification

There is so much more to know than ever before regarding precious metals. Investing in silver and gold is not something only the wealthy can do. New or seasoned investors can roll gold and silver into 401k and IRA options.

Oxford Gold Group is a precious metals investment firm dedicated to helping you make the most out of your precious metals investments and grow your portfolio. At the Oxford Gold Group, we can dispel the myths about investing in gold and discuss options to protect your retirement. We can help you diversify.

Oxford Gold Group is the industry leader in precious metal investments. We make the process simple to understand and easy to do and are with you every step of the way. Whether you are an experienced investor or just getting started, our experts can help you boost your investment strategy.

See our client reviews for more information on our products and services or contact our knowledgeable investment team at 833-600-GOLD to learn more about investing in gold vs. S&P 500.

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