Is Gold Better Than Stocks? An In-Depth Comparison for 2025

Choosing between gold and stocks is like picking between a reliable old friend and an exciting new one. Both have their charm, both have their quirks and both certainly deserve a place in your investment strategy. But is one truly better than the other?

As someone who’s been watching both markets closely, I’ve noticed that in 2024-2025, this question has become increasingly relevant as both assets have hit record highs. Gold is currently trading around $2,414 per troy ounce, up 17.2% this year alone, while the S&P 500 has increased by approximately 17.9% in the same period.

Let’s dive deep into this golden debate and see which investment might shine brighter for your portfolio,

Performance Comparison: Gold vs. Stocks

First, let’s look at the numbers. They tell an interesting story about how these two asset classes have performed over different time periods:

What’s interesting here is that neither asset consistently outperforms the other across all time periods. Gold has actually outperformed stocks over the 3-year and 20-year periods, which might surprise many investors who believe stocks always win in the long run.

The Risk Factor: Safety vs. Growth

Gold: The Safe Haven

Gold is generally considered less risky compared to stocks Its value tends to be stable and can even rise during times of economic instability or inflation, making it a safe haven for investors It is less affected by economic cycles and market fluctuations, providing a cushion against market downturns.

This is why we often see gold prices spike during economic crises. For example, during the 2008 financial crisis, gold performed remarkably well while stocks plummeted.

Stocks: The Growth Engine

Stocks, on the other hand, are inherently riskier. Their value is influenced by a variety of factors including company performance, economic indicators, and market sentiment. This can result in significant price volatility.

But this higher risk comes with a potential reward: growth. The stock market has historically delivered higher returns than gold over very long periods (like that 40-year comparison where stocks returned nearly six times more than gold).

Income Generation: Dividends Make a Difference

One significant advantage stocks have over gold is their ability to generate income:

Gold: No Passive Income

Gold just sits there, looking pretty. It doesn’t:

• Pay dividends
• Generate interest
• Create any income while you hold it

Its value relies solely on price appreciation, which means you only make money when you sell it at a higher price than you bought it.

Stocks: Potential Dividend Earner

Many stocks pay dividends, which are regular payments to shareholders from company profits. These dividends can:

• Provide a steady income stream
• Be reinvested to buy more shares (compounding your returns)
• Significantly enhance total investment returns over time

This income-generating capability is a major reason why many retirees and income-focused investors prefer dividend-paying stocks.

Tax Implications: Uncle Sam Treats Them Differently

The tax man doesn’t view these investments equally, and this can significantly impact your after-tax returns:

Gold Tax Treatment

Gold is considered a collectible by the IRS, which means:

• Long-term gains (held over a year) are taxed at a maximum rate of 28%
• Short-term gains are taxed at ordinary income rates
• Gold ETFs and mining stocks generally follow the same tax rules

Stock Tax Treatment

Stocks enjoy more favorable tax treatment:

• Long-term capital gains are taxed at lower rates (0%, 15%, or 20% depending on income)
• Qualified dividends receive the same preferential tax rates as long-term gains
• Various tax-advantaged accounts (IRAs, 401(k)s) can further reduce tax burdens on stock investments

This tax advantage gives stocks a significant edge for taxable accounts.

When Should You Choose Gold?

Gold really shines (pun intended) under certain conditions:

1. During economic uncertainty – Gold often performs well during recessions, depressions, and financial crises
2. As an inflation hedge – Historically, gold has maintained purchasing power during inflationary periods
3. For portfolio diversification – Gold typically has low correlation with stocks and bonds
4. As you near retirement – Reducing portfolio volatility becomes more important as you have less time to recover from market downturns
5. During periods of geopolitical instability – International tensions often drive gold prices higher

A typical gold investment might include physical gold (coins or bars) and gold-backed financial instruments like ETFs. Many financial advisors recommend allocating between 5-10% of your portfolio to gold for diversification purposes.

When Should You Invest in Stocks?

Stocks tend to be the better choice under these conditions:

1. For long-term growth – Especially when you have decades before needing the money
2. During economic expansion – Bull markets can deliver exceptional returns
3. When seeking income – Dividend-paying stocks provide regular cash flow
4. For tax-advantaged accounts – The favorable tax treatment compounds over time
5. When you can tolerate volatility – If you won’t panic sell during downturns

A typical stock portfolio includes a mix of individual stocks, mutual funds, and ETFs spread across different sectors, company sizes, and geographic regions.

The Best Approach: Why Not Both?

Here’s where I’m gonna get real with you – the smart money isn’t choosing between gold and stocks, it’s using both strategically.

By combining gold and stocks, investors can achieve a more balanced and resilient portfolio. Gold provides a counterbalance to the inherent volatility of investing in stocks, reducing overall portfolio risk. In times of market stress, gold can help mitigate losses from declining stock prices.

I’ve seen too many investors go all-in on either stocks or alternative investments like gold, only to regret it later. Balance is key.

My Recommendation: The 5-10-85 Approach

For most investors, I recommend:

• 5-10% in gold as a stabilizer and crisis hedge
• 10% in cash or short-term bonds for liquidity
• 80-85% in a diversified stock portfolio for growth

This approach gives you:

• Protection during market downturns (gold)
• Ready cash for emergencies or opportunities (cash/bonds)
• Long-term growth potential (stocks)

Of course, you’ll want to adjust these percentages based on your:

• Age
• Risk tolerance
• Investment goals
• Time horizon

Practical Ways to Invest in Gold and Stocks

Gold Investment Options

1. Physical gold – Coins, bars, jewelry
2. Gold ETFs – Like GLD, IAU, or SGOL
3. Gold mining stocks – Companies that mine and produce gold
4. Gold mutual funds – Professionally managed funds focusing on gold-related investments
5. Gold futures and options – More complex derivatives for experienced investors

Stock Investment Options

1. Individual stocks – Shares in specific companies
2. Index funds – Passive funds tracking market indices like the S&P 500
3. Mutual funds – Actively managed diversified stock portfolios
4. ETFs – Exchange-traded funds offering instant diversification
5. Dividend-focused investments – Stocks or funds prioritizing income generation

Final Thoughts: It’s Not About Better, It’s About Balance

So, is gold better than stocks? The honest answer is: it depends.

If you want maximum long-term growth and can handle volatility: stocks are probably better.

If you want stability, inflation protection, and crisis insurance: gold has its advantages.

But the wisest approach isn’t choosing one over the other—it’s understanding how they work together. Gold and stocks complement each other beautifully in a well-structured portfolio.

I’ve seen investors make the mistake of thinking in binary terms—gold OR stocks, when they should be thinking gold AND stocks. The proportion might change based on economic conditions and personal circumstances, but both deserve consideration in most portfolios.

Remember, investing isn’t about picking the single best asset—it’s about building a resilient portfolio that can weather different economic scenarios while still growing your wealth over time.

What’s your investment strategy looking like? Are you team gold, team stocks, or team balance? Whatever you choose, make sure it aligns with your personal financial goals and risk tolerance.

Happy investing!