Comparing 3 Popular Ways To Invest Buy Gold, Stocks And Real Estate
Investors have many choices for growing wealth in different financial markets. While each market has its advantages and disadvantages, understanding the difference between gold investing, stocks, and real estate, along with diversification, are the keys to long term success.
There are numerous financial markets and options for investors to utilize in order to build wealth and reach 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 reach those goals. Whether the best move is to buy gold, stocks, or real estate, investors have to make informed decisions that take the market and their own personal situation in consideration when choosing where to place their money.
Using Gold Investing To Build A Strong Portfolio For The Long Haul
Precious commodities, especially gold investing, are a highly attractive option for investment dollars. It is a conservative and low risk way to build wealth over a long term timeframe. As history has shown, investors can expect solid returns over long periods of time and less volatility than equities. For people looking to build wealth long term for retirement, a college fund, or a big purchase should look closely into gold investing. Unlike equities or real estate funds, precious metals will never lose all of their value due to the inherent worth of the commodity. This fact makes gold investing highly attractive in bad markets where other holdings can be rapidly losing value.
Good performance in bad economies drives many people to buy bullion. While the stock market crashes or housing prices bottom out, gold will typical hold its value and grow in worth as more investors flock to this safe haven. The conservative, long term qualities of precious metals combined with low volatility and a great upside makes them ideal as the foundation of a portfolio that will deliver strong returns even in bear markets. When economic downturn hits, people buy gold. When the economy is doing good, people still buy gold to achieve diversity and stability.
How Real Estate Holdings Fit Into Investment Strategies
Individuals can place their money into real estate through REITs, or real estate investment trusts. Similar to a precious commodity, the actual properties of a REIT form an underlying value for the fund. The price of the housing markets determines the growth or decline of the fund. REITs are an excellent way to get into the real estate market and harness its earnings. Common wisdom used to say that the price of homes will always rise in the future. However, the current economic situation and housing bust has disproven that old adage. In fact, real estate investment today is rather risky and should not constitute the bulk of a portfolio.
Investing In Equity And Stocks
The common perception of investment is the common stock. Investors purchase a share of ownership in a company while sharing that company's fortunes or misfortunes. Stocks typically offer the highest possible return of most other investing methods simply for the fact that your holdings might contain the next Microsoft or Google. However, these extraordinarily well performing stocks are a rarity and should not be used to judge all equities. The downside of an equity is that the company can go bankrupt, completely wiping out the worth of the stock leaving no principle behind.
While day traders try to turn a quick method, stocks should be viewed as a long term investment. Otherwise, a quick turnaround on equities results in entirely too much risk. Stocks are also best utilized in funds that aggregate many companies into a single share so that a failure on a single business is not catastrophic. Similar to gold investing, equities should form a portion of long term holdings designed to build wealth over a longer timeframe. Keep in mind that stocks have not yet returned to their highest level set in 2007 and even the past decade has been rough. Sometimes, it can take a long time to ride out a bear market to see invested money bear fruit.
Diversity Is The Best Method
Each of the above options all has their own set of unique properties as well as pros and cons. In addition to understanding how each of them returns a profit, including a portion of each type is essential in creating a lasting vehicle for growing wealth. A solid start would be to buy gold and some equities to hold for the long term, with real estate options provide some extra growth opportunities when the housing market is strong. Even in a bad economy, increasing the amount of gold investing can often be a solid bet, but don't neglect every other market out there -- the strongest portfolio is a well diversified one.
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ABOUT THE AUTHOR
Chris Harmen is a contributing editor for the U.S. Gold Bureau, providing investors with the knowledge and ability to buy gold and integrate gold investing into their portfolios.