Gold vs. Stocks: A Comparative Analysis of Risk and Return as Investment Assets
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This study compares gold and stocks as investment assets by examining their historical risk and return characteristics over the 2015–2025 period. Gold is traditionally considered a diversification asset because its price may behave differently from equity markets during periods of financial uncertainty, while stocks are generally associated with higher long-term growth potential and greater exposure to market risk. The study uses annual gold price changes and annual S&P 500 price returns as proxies for the performance of the two asset classes. Descriptive statistical measures, including average annual return, standard deviation, minimum and maximum return, cumulative growth, compound annual growth rate, and correlation, are used to evaluate the differences between the two assets. The results show that the S&P 500 generated a higher average annual return and compound annual growth rate during the selected period, while gold experienced a similar level of annual volatility. Gold nevertheless demonstrated diversification characteristics because its annual returns were not perfectly correlated with stock returns. The findings support the view that gold and stocks have different risk-return characteristics and may therefore serve different functions within an investment portfolio. The study concludes that comparing assets solely according to average return can overlook the importance of volatility and correlation. Investors' asset-allocation decisions should therefore consider both return objectives and risk characteristics.
Keywords
Diversification, Gold, Investment Return, Investment Risk, Portfolio Management, S&P 500, Stocks