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Would Jordan Belfort have become the Wolf of Wall Street if he’d invested in gold instead of stocks?<\/p>\n\n\n\n
Probably not.<\/p>\n\n\n\n
He almost certainly wouldn’t have built a fortune at the extraordinary speed portrayed in the film. But then again, gold has never really been about chasing spectacular returns.<\/p>\n\n\n\n
Shares and gold serve very different purposes and rather than asking which is better, it’s perhaps more interesting to look at why investors turn to each of them, and how they behave over time.<\/p>\n\n\n\n
Welcome back to the third installment of the Gold Versus series.<\/p>\n\n\n\n
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Stocks and shares sit at the heart of long-term financial planning, whether through individual shares, investment funds, pensions, ISAs or workplace schemes. Gold, meanwhile, is not usually bought for income or business growth, but as a store of value and something tangible outside the banking system.<\/p>\n\n\n\n
So, is it actually fair to compare the two? <\/p>\n\n\n\n
Stocks and shares are designed to grow wealth through company performance and economic growth, whereas gold is associated with protection and diversification. <\/p>\n\n\n\n
Both therefore are invested in for different reasons, but let\u2019s see how they stack up side by side anyway.<\/p>\n\n\n\n
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When you buy shares, you buy a small part of a company. If the company performs well, grows its profits, attracts more investors or becomes more valuable, the share price may rise. If it performs badly, or if wider market conditions become difficult, the share price may fall.<\/p>\n\n\n\n
Some companies also pay dividends. These are payments made to shareholders from company profits. Not all companies pay dividends – and they are not guaranteed – but they are one of the reasons shares can be attractive to long-term investors.<\/p>\n\n\n\n
Shares can be bought individually, but many people invest through funds. These funds hold lots of different companies, which can help spread risk. For example, rather than buying shares in one bank, retailer or technology company, a fund might invest across hundreds or thousands of businesses.<\/p>\n\n\n\n
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Modern stock markets developed as companies needed ways to raise money. By selling shares, businesses could access capital from investors, while investors had the chance to benefit if those businesses succeeded.<\/p>\n\n\n\n
The London Stock Exchange traces its roots back to the 17th century, when traders and brokers began meeting in coffee houses to buy and sell shares and government debt. Over time, this became more formalised, and stock exchanges became central to the way companies raise money and investors build wealth.<\/p>\n\n\n\n
For much of history, investing in shares was mainly associated with wealthier individuals and institutions. But today, online platforms, workplace pensions, ISAs and investment apps have made stock market investing much more accessible.<\/p>\n\n\n\n
For many people, owning shares is now a normal part of long-term saving, even if they do not think of themselves as stock market investors.<\/p>\n\n\n\n
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Gold can be held physically, in bars,<\/a> coins<\/a> and jewellery<\/a>, or digitally through modern platforms which represent ownership of real gold, such as gold ETFs<\/a>.<\/p>\n\n\n\n Gold doesn’t pay dividends, interest or income – its value comes from price movement and global demand. It also attracts attention during periods of inflation, economic stress, geopolitical uncertainty and market volatility.<\/p>\n\n\n\n <\/p>\n\n\n\n Stocks and shares come with investment risk; if you buy shares in one company, your returns depend heavily on how that company performs. Even large, well-known businesses can lose value if profits fall, competition increases, management makes mistakes or wider market sentiment turns negative.<\/p>\n\n\n\n Even diversified funds can fall sharply when markets are under pressure. During recessions, financial crises or sudden shocks, stock markets can move quickly and investors may see the value of their holdings drop.<\/p>\n\n\n\n The price of gold can also rise and fall – sometimes sharply. It can be affected by interest rates, inflation expectations, currency movements, central bank buying, investor sentiment and global events.<\/p>\n\n\n\n However, gold is not dependent on a company\u2019s profits, leadership team or business model. A gold bar won\u2019t go bankrupt, nor will it issue a profit warning. It does not rely on quarterly earnings. It\u2019s not necessarily risk-free, but the nature of the risk is different.<\/p>\n\n\n\n <\/p>\n\n\n\n When companies grow, reinvest profits, expand into new markets and increase earnings, shareholders can benefit. Over long periods, stock markets have produced strong returns, particularly when dividends are reinvested.<\/p>\n\n\n\n This is the power of compounding. A shareholder can benefit not only from rising share prices, but also from reinvesting dividends over many years.<\/p>\n\n\n\n Gold doesn\u2019t compound in the same way because it doesn\u2019t generate income. If you own one gold bar, you still own one gold bar years later. The return depends on whether the market price of gold has gone up or down.<\/p>\n\n\n\n That said, gold has had periods of very strong performance.<\/p>\n\n\n\n For example, gold prices<\/a> rose significantly during the 2000s, particularly around the Global Financial Crisis. It has also attracted renewed attention<\/a> during more recent periods of economic uncertainty.<\/p>\n\n\n\n Stocks and gold can therefore have very different periods of strength.<\/p>\n\n\n\n There are times when equities perform strongly because the economy is growing and businesses are doing well. There are other times when gold becomes more attractive because investors are worried about inflation, instability or falling confidence in financial markets.<\/p>\n\n\n\n This is why the answer to \u201cwhich performs better?\u201d depends on the time period being measured.<\/p>\n\n\n\n <\/p>\n\n\n\n Inflation affects shares in mixed ways. Some companies can pass rising costs onto customers by increasing prices. Others cannot. Higher inflation can squeeze profit margins, reduce consumer spending and lead to higher interest rates, which can put pressure on share prices.<\/p>\n\n\n\n When people are worried about currencies losing purchasing power, gold becomes more attractive. This is one of the reasons investors often turn to gold during periods of high inflation.<\/p>\n\n\n\n However, gold doesn\u2019t rise perfectly every time inflation rises. Like any asset, it moves according to a range of factors. <\/p>\n\n\n\n The broader point is that stocks and gold usually respond to inflation in different ways. Stocks are tied to company performance and the wider economy. Gold is more aligned with confidence, monetary conditions and demand for safe-haven assets.<\/p>\n\n\n\n <\/p>\n\n\n\n Income generation is one of the clearest differences between gold and shares.<\/p>\n\n\n\n Some shares pay dividends which can provide investors with a regular income (although dividends can be reduced or stopped if a company performs poorly).<\/p>\n\n\n\n Gold however, doesn\u2019t provide an income. For someone who wants an asset that can generate regular payments, shares may have an advantage. For someone who is more focused on holding value outside the financial system, gold may feel more suitable. Again, it comes back to what job the asset is meant to do.<\/p>\n\n\n\n <\/p>\n\n\n\n Stocks and shares are generally highly liquid. If they are listed on a major stock exchange, they can usually be bought or sold quickly during market hours. The price is visible, and the transaction can often be completed almost instantly through an investment platform.<\/p>\n\n\n\n Gold is also relatively liquid, but selling physical gold involves practical steps.<\/p>\n\n\n\n You need to find a buyer, agree a price, verify the gold and complete the transaction. This may be straightforward, but it is not the same as clicking \u2018sell\u2019 on an investment platform, which is why some digital gold products, such as gold ETFs, have become popular.<\/p>\n\n\n\n <\/p>\n\n\n\n Tax is another area where the comparison depends on how the asset is held.<\/p>\n\n\n\n With shares, investors may need to think about Capital Gains Tax if they sell for a profit. Dividend income may also be taxable, depending on the amount received and the investor\u2019s personal circumstances. However, shares can often be held within tax-efficient wrappers such as ISAs or pensions, which may reduce or remove certain tax liabilities.<\/p>\n\n\n\n Gold has tax considerations too<\/a>. If you sell gold for more than you paid for it, the gain may be subject to Capital Gains Tax, depending on the type of gold and your personal tax position. However, some UK legal tender coins, such as Sovereigns and Britannias, are generally exempt from Capital Gains Tax which is one reason these coins can be attractive to UK investors.<\/p>\n\n\n\n As always, tax rules depend on individual circumstances, and anyone unsure should seek professional advice.<\/p>\n\n\n\n <\/p>\n\n\n\n Stocks tend to do well when the economy is growing, companies are profitable and investors feel confident about the future. They are linked to expansion, innovation, spending and business success.<\/p>\n\n\n\n Gold usually becomes more attractive when conditions during periods of inflation, geopolitical tension, financial stress or concerns about currency value.<\/p>\n\n\n\n That does not mean gold always rises when stocks fall – markets are rarely that simple. But gold has been used as a way to diversify away from traditional financial assets. <\/p>\n\n\n\n <\/p>\n\n\n\n If you are weighing up gold against stocks and shares, it helps to start with a simple question: what do you actually want this money to do?<\/p>\n\n\n\n Stocks and shares are more often than not about long-term growth. They give investors exposure to companies, innovation, profits and economic expansion.<\/p>\n\n\n\n Gold is about a store of value, a hedge against uncertainty and a way to diversify beyond cash, shares and bonds.<\/p>\n\n\n\n When you look at them like that, it\u2019s not so much about which one is \u201cbetter\u201d, but more about what role each one plays.<\/p>\n\n\n\n When all your money is tied up in one place, you are relying on one outcome. If that asset performs badly, or if conditions change, there is nothing else to balance it out. Adn that\u2019s why, for many investors, stocks and gold are not competing choices at all, they\u2019re complementary.<\/p>\n\n\n\n Both have risks. Both can rise and fall in value. But they behave differently, and that difference is exactly why many people choose to hold both.<\/p>\n\n\n\n Learn more about investing in gold: goldbank.co.uk<\/p>\n\n\n\n <\/p>\n\n\n\n <\/p>\n\n\n\n This article is for general information only and does not constitute financial or investment advice. Individual circumstances vary, and readers should seek independent professional financial advice before making any financial decisions.<\/em><\/strong><\/p>\n\n\n\n Read more: <\/p>\n\n\n\nComparing gold and stocks on risk<\/strong><\/h3>\n\n\n\n
Comparing gold and stocks on returns<\/strong><\/h3>\n\n\n\n
The effect of inflation on stocks vs gold<\/strong><\/h3>\n\n\n\n
Income generation<\/strong><\/h3>\n\n\n\n
Which is more liquid, gold or stocks?<\/strong><\/h3>\n\n\n\n
Tax considerations between stocks and gold<\/strong><\/h3>\n\n\n\n
How stocks and gold behave in uncertain times<\/strong><\/h3>\n\n\n\n
How stocks and gold can sit side by side<\/strong><\/h3>\n\n\n\n