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Investment Performance of Precious Metals vs. Stocks

There is are a huge number of places where investors can place their money, and investing in precious metals is only one of these places. Here we compare the details of investing in precious metals with the details of investing in stocks, one of the most common investment vehicles available.

View All Products on CBMintInvesting in Precious Metals Compared to Investing in Stocks

Many investors hope to protect and grow their wealth by placing it in more traditional investments such as stocks and bonds. These types of investments are widely different than investing in silver and gold. Stocks are equities, meaning that the buyer of the stock owns a portion of the company represented by the stock.

On the other hand, precious metals are commodities, like iron, sugar, rice, and the infamous pork bellies. Buying commodities allows the investor to own a physical, tangible product. Investors who buy stocks make money when the companies in which they invest grow their business and increase profits, making stock in that company more desirable and, therefore, increasing the stock price. Commodities increase in value simply when there is increased demand for that particular commodity. Take gold, for example. During times of economic trouble demand for gold increases, thus the price of gold increases.

Historically, stocks (as measured by the Dow Jones Industrial Average) have outperformed precious metals in terms of investment. Owning physical precious metals provided stability, security, and protection against inflation, but if the goal of an investor was short term profit gain, the stock market was often a better bet. However, the last 14 years have seen a sea change in this accepted wisdom, with investment in metals overwhelmingly outperforming traditional investments.


Stocks Versus Precious Metals in Modern Times

The recent surge in gold prices and silver prices reflects the increased demand and diminishing supply. An investor who chose to buy $20,000 worth of typical stocks in the year 2000 saw 10 years later, on average, a modest gain of around 10%. An investor who opted to buy gold bullion or buy silver bullion for the same amount saw it increase in value to over $100,000 in the same time frame.

This enormous change in the relationship between investing in bullion and investing in stocks can be explained rather easily. The nature of the new economy, with high unemployment and shrinking consumer demand, has required an ever-expanding monetary policy, with the United States leading the way. This infusion of cash into the economy keeps it briefly afloat but also increases the value of physical commodities like gold and silver.

Secondly, the ongoing and looming debt crisis facing Europe, and, by extension, the United States, has investors buying gold and silver bullion in record amounts. In short, investors have been willing to sacrifice the greater profit potential of the stock markets in order to gain a higher level of wealth security.

Thirdly, the stock and money markets themselves have become increasingly volatile, with huge price upswings occurring even in the course of a single day. Fueled by powerful algorithms, automatic computerized trading has all but squashed the ability of an individual investor to master the markets, which are now subject rapid changes, causing many investors to fear for the safety of their market investments.


Protecting Yourself By Buying Precious Metals Bullion

Buy Physical Gold and Silver OnlineThere is a simple way for investors to protect themselves and their wealth -- buying physical precious metals bullion. Currencies were formerly backed by physical gold and silver. Buyers today can replicate that stability by purchasing gold, silver, and platinum bullion. Owning physical precious metal allows investors not only to have all the security thus provided, but also to own an extremely valuable commodity whose worth will only increase.

Physical ownership of precious metals bullion really shows its advantages during times of economic troubles. Holders of currencies or traditional investments, like stocks and bonds, watch their savings evaporate, while holders of physical precious metals watch their wealth soar. Buying gold and silver often do not have the allure of huge quick profits that stock markets can offer, but steady growth and safety more than make up for that. Because they have value that is independent of the currency and stock markets, owning precious metals is the ultimate security.