Comparing 3 Popular Ways to Invest: Buying Gold, Stocks, and Real Estate
There are numerous financial markets and options that investors can use to build wealth and achieve their financial goals. Diversity is key to having a strong portfolio, and success requires understanding each unique investment option and how they can be used effectively to achieve those goals. Whether the best move is to buy gold, stocks, or real estate, investors need to make informed decisions that take the market and their own personal situation into account when choosing where to put their money.
Using Gold Investing to Build a Strong Long-Term Portfolio
Precious commodities, especially investing in gold, are a very attractive option to invest in dollars. It is a conservative, low-risk way to build wealth over the long term. As history has shown, investors can expect strong returns over long periods of time and less volatility than stocks. For people looking to build long-term wealth for retirement, a college fund, or a big purchase, they should look closely at investing in gold. Unlike stocks or real estate funds, precious metals will never lose their full value due to the inherent value of the commodity. This fact makes investing in gold very attractive in bad markets where other positions can lose value quickly.
Good performance in bad economies drives many people to buy bullion. As the stock market crashes or house prices bottom out, gold will typically hold its value and grow as more investors flock to this safe haven. The long-term conservative qualities of precious metals, combined with low volatility and high upside potential, make them ideal as the foundation of a portfolio that will generate strong returns even in bear markets. When the economic recession hits, people buy gold. When the economy is doing well, people continue to buy gold for diversity and stability.
How Real Estate Holdings Fit Into Investment Strategies
People can put their money into real estate through REITs or real estate investment trusts. Like a precious commodity, the actual holdings of a REIT form an underlying security for the fund. The price of the property markets determines the growth or decline of the fund. REITs are a great way to enter the real estate market and take advantage of your earnings. Common wisdom used to say that home prices will always go up in the future. However, the current economic situation and the housing collapse have given the lie to that old adage. In fact, real estate investing today is quite risky and shouldn’t make up the bulk of a portfolio.
Invest in stocks and shares
The common perception of investment is common action. Investors buy a piece of ownership in a company while sharing in the fortunes or misfortunes of that company. Stocks generally offer the highest possible return of most other investment methods simply due to the fact that your holdings may contain the next Microsoft or Google. However, these extraordinarily well-performing stocks are a rarity and should not be used to judge all stocks. The downside of a stock is that the company can file for bankruptcy, wiping out the value of the stock entirely without leaving any principle behind.
Although day traders try to use a quick method, stocks should be viewed as a long-term investment. Otherwise, a quick change in stocks results in too much risk. Stocks are also best used in funds that aggregate many companies into a single stock so that the failure of a single company is not catastrophic. Similar to investing in gold, shares should be part of long-term positions designed to build wealth over a longer period of time. Keep in mind that stocks have yet to return to their high set in 2007 and even the last decade has been rough. Sometimes it can take a long time to get through a bear market to see the money invested pay off.
Diversity is the best method
Each of the above options has its own set of unique properties, as well as advantages and disadvantages. In addition to understanding how each generates profit, including a portion of each type is essential to creating a long-lasting vehicle for wealth growth. A solid start would be to buy gold and some stocks to hold for the long term, as real estate options provide some additional growth opportunities when the housing market is strong. Even in a bad economy, increasing the amount of investment in gold can often be a solid bet, but don’t neglect all other markets: the strongest portfolio is a well-diversified one.
