Editor’s Note
- Gold versus Stocks: A 10-Year Test
- Comparison of returns on investments in gold and stocks
- Stocks as productive assets
- Investment risks in gold and stocks
Gold versus Stocks: A 10-Year Test
Have you ever heard the classic financial advice from your parents about where best to keep your hard-earned money?
Yes, gold was the advice your parents gave you. Gold was popular because of its tangible form: physical, tangible, easy to buy, and the expectation that the price would continue to rise.
With the development of technology, there are now other attractive financial investment options. These offer enticing returns, but also entail risks. Which ones are they?
Stocks, a fast-growing financial investment option that is popular with many tech-savvy investors, young and old.
Let’s compare investments in gold and stocks over the past 10 years to test traditional financial advice.
Experiments show that stocks, particularly BCA stocks, yield significantly higher returns than gold. This is due to the concept of productive assets in stocks, which generate dividends and price increases, whereas gold depends exclusively on price increases.
Although stocks carry a higher risk in the short term, these risks decrease drastically in the long term.
The conclusion is that gold functions as a stable-value investment, whereas stocks create wealth, and the greatest risk consists of not investing at all due to inflation.
Comparison of investment returns in gold and stocks
If 13 million rupiah (equal to 22.7 grams of gold) had been invested in gold in 2012, it would have been worth 22.1 million rupiah in 2022, with a net profit of 9.1 million rupiah. If, on the other hand, investments had been made in BCA shares, that would have been worth 12 million rupiah (equal to 7,500 shares) in 2012, or 60 million rupiah in 2022.
The returns on shares far exceed those of gold over the same period. This difference is explained by the concept of productive assets. Gold is a passive asset whose value only increases when the price rises.
Shares as productive assets
Shares are small ownership interests in a company that continues to operate and generates profits. Shareholders are entitled to dividends.
Over the past 10 years, BCA’s share investments have yielded a dividend of approximately 4.4 million rupiah, in addition to price increases.
Shares have two sources of income: price increases (capital gains) and profit sharing (dividends), whereas gold only experiences price increases.
Investing in gold and shares: risks
Risk is a common concern. In the short term, both stocks and gold are equally risky.
In the long term (more than 5 years), the risk of stocks decreases drastically to a low level, while gold remains safe. Time is an investor’s best friend.
Gold serves as a stable investment to protect purchasing power against inflation. Shares of good companies are a tool to build wealth and significantly increase the value of money.
The greatest risk is not making the wrong choice between gold and stocks, but rather doing nothing and letting money sit idle, causing inflation to erode its value. **tok
