Over the last decade, gold prices have produced a steady return of 116%, averaging at 8% p.a. Bitcoin, on the other hand, has increased 16,080%, averaging a return of 66.3%  p.a. Both these are favourites for investors for different reasons—gold for its stable returns during turbulent times, and Bitcoin for its skyrocketing returns.

Gold as an Investment

Gold is the refuge or safe haven for investors during economic uncertainty and geopolitical turmoil. There has been plenty of that lately with elections, war and conflict,  trade wars and nationalism. Markets have been quite unpredictable and volatile, with extremes of high returns and losses. While gold may not offer super returns like big tech companies, they are historically known for steady and stable growth and returns.

Many countries increase their gold bullion reserves when global economic volatility peaks.

Benefits of Gold

Portfolio diversification reduces risk

When trying to diversify a portfolio, investors look for investments that are not closely correlated to each other. Gold negatively correlates to stocks, meaning it does well when stocks do badly. A combination of gold and stocks helps spread the overall risk of a portfolio.

Hyperinflation hedge

When the cost of living increases, gold prices tend to rise. When markets perform poorly and inflation is high, investors flock to gold as a ‘sure win’. When a local currency loses value (like the US dollar, for example), investors buy gold as a good store of value. Gold is generally unaffected by fiat currency and other assets.

Gold historically maintains its value during economic and geopolitical uncertainty

Over history, currencies and countries have risen and fallen, but the only consistency has been gold. Gold is recognised and accepted globally as a means of wealth and trade and maintains its value.

Easy to buy without having to physically store and secure it

Gold is becoming easier to buy, and investors can own it without storing it physically. Also, many gold ETFs are available for investors to invest in gold. These funds allow exposure to gold without having the headache of physical gold bullion.

Increase in demand

Apart from its value as a commodity and investment asset, the demand for gold is increasing in jewellery manufacturing and as conductors in electronics.

Bitcoin as an Investment

This digital or virtual cryptocurrency,

Although Bitcoin has skyrocketed over the last few years and offers super returns, the cryptocurrency is still considered highly volatile and suitable for investors who are more likely to take risks with their investments.

Bitcoin does, however, make an excellent investment to diversify a portfolio. It is the largest cryptocurrency by market cap, but what makes it so popular is its decentralised quick transactions and not being regulated by any country’s financial regulations.

Benefits of Bitcoin

Decentralised monetary system

As cryptocurrencies are decentralised, governments cannot manipulate or influence them.

Accessibility

It is quick and easy to access. Anyone can buy and use Bitcoin no matter where they are in the world.

Secure and safe

Bitcoin uses blockchain technology, is secured through cryptography, and is virtually impossible to counterfeit. Transactions are secure and private.

Transparency

All transactions are transparent and accessible to everyone while keeping the identity of individuals private.

Faster and cheaper money transfers

Transactions are instantaneous and charge little or low fees.

Hedge against inflation

Cryptocurrencies are not tied to a single currency or economy and, thus, are not affected by inflation.

Gold and Bitcoin are two very different assets with very different characteristics, but both can contribute to the diversification of a portfolio and hedging against inflation. Always speak to a financial advisor before making any investment decisions.

Please note, the above is for educational purposes only and does not constitute advice. You should always contact your deVere advisor for a personal consultation.

* No liability can be accepted for any actions taken or refrained from being taken, as a result of reading the above.