When investing in the stock market, many are fearful going into it because of how risky they perceive it to be. If they still want to invest, they may turn to physical goods that are known to have worth, such as gold and silver, or even real estate. This is generally a sentiment held by older generations who saw the stock market crash, but in current days this might not be as true. What new investors might now know is that the market for physical goods fluctuates just like the stock market does and items are still only worth what someone will pay for them. So what’s better to invest in: physical commodities or stocks? Here’s a look at the pros and cons of both.
The stock market
With the stock market, you are directly paying for a small part of ownership in a company. For many stocks, there is an opportunity for dividends to be paid to you just for owning that stock over a specified period. There is also a fairly low buy-in for the stock market with some stocks or mutual funds starting at as low as $100. This system is also set up so that you are able to buy stocks from a wide range of companies so that you aren’t ‘putting all your eggs in one basket’ and having these stocks be fairly liquid. The downside to all of this is that the market fluctuates and can have drastic changes from day to day. This requires a certain threshold for risk as well as careful attention and knowledge of when to buy and sell.
With physical commodities (investments), many times people will buy valuable materials, land, or collectible items in the hopes that they’ll be worth more in the future. The upside to this strategy is that you have something that’s tangible – you know it’s there and won’t go away unless you decide to sell. People feel comfort from being able to physically see their investments, rather than just be told that they’re there. The major problem with this is that you have to maintain your items, especially if you’re investing in real estate. Also, there are fluctuations in the market of physical items, posing the same problem of risk that come with stocks without the same liquidity (meaning ease of turning into cash).
What to choose?
In the end, what you choose to invest in is completely based on personal preference and risk tolerance. Both buying stocks and buying physical property have their ups and downs, and the value of both is constantly changing. Investing requires attention to the changing prices of goods and the value of companies. If it’s something you don’t know where to start with, consider consulting an investment professional or financial institution on what you should be investing in. It’s also worth considering starting small. Get a feel for investing by not putting a ton of money in to start and sticking to low-risk investments.