GOLD v FTSE-100

Gold and the FTSE-100 exhibit different risk profiles and performance characteristics that may impact an investor’s portfolio in varying ways.

Stability

  • Gold: Gold is often perceived as a ‘safe-haven’ asset due to its ability to retain value during market downturns. It provides a hedge against inflation, with a historical annualised return of 4.9% before inflation. It retains its relative value over extended periods due to its intrinsic value and limited supply, which is why it’s often included in long-term investment portfolios to provide stability and hedge against inflation.

FTSE-100

The FTSE-100 is subject to market volatility due to its composition of publicly traded companies, which can be affected by economic, political, and other external factors. For example, in March 2020, the index experienced a significant one-day crash amid global recession fears induced by the coronavirus crisis.

  1. Long-Term Growth

– Gold: Over an 11-year period (2012-2023), gold prices have shown growth, illustrating its potential for long-term appreciation.

Gold’s price appreciation from 2012 to 2023 indicates a steady growth, with a particular spike in value over the past year, showing a 15.84% increase from the previous year’s price. This growth trajectory, along with its historical stability, makes gold a solid choice for long-term investment.

FTSE 100

The FTSE 100’s performance can vary year-to-year. In the year leading up to October 2023, it had an 11.24% increase, although the 1-year return was -5.17% as of another data point.

  1. Long-Term Performance

Gold has had a significant appreciation in value over the long term. Since 1972, gold’s value increased by 7,800%, and notably, it emerged as the top-performing asset in the 21st century to date with a 648% increase compared to a 231% increase from shares. Over a 45-year period, gold outperformed stocks and bonds, and a £1,000 investment in gold at the end of August 1971 would have grown to over £45,000 today, reflecting a compounded annual return of 8.1%.

FTSE 100, an index of the largest 100 companies listed on the London Stock Exchange, has also demonstrated long-term growth. Over the past 119 years, it yielded an annualised return of +4.9% above inflation.

  1. Stability

Gold is often perceived as a ‘safe-haven’ asset due to its ability to retain value during market downturns. It provides a hedge against inflation, with a historical annualised return of 4.9% before inflation.

FTSE 100, on the other hand, can be influenced by the performance of its constituent companies and broader market dynamics. While it offers dividend yields, its value can fluctuate significantly during economic downturns.

Gold has showcased substantial long-term growth, especially in the 21st century, alongside a reputation for stability, particularly during economic uncertainties. The choice between GOLD and FTSE-100 would depend on individual investment objectives, risk tolerance, and the desired level of income and diversification.

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