BA 341: Corporate Financial Management
Our main objective for this assignment is to find out if an investor should invest in gold or stocks in current economy. Besides that, it is to know why an investor should invest in gold and not stock in current economy. Other than that, we will make some comparison between the years 2006 until 2010. Therefore, we also learn the main factors that affect investor to buy gold. Furthermore, we have to compare the difference between gold and stock and also the drawbacks between gold and stock. It is because they may have different factors to consider in cooperate financial management. Last but not least, we also want to understand how gold can benefit shareholders even when investors hold diversified portfolios of investments. INTRODUCTION
Gold is a precious metal ore that is mined underground then melted and refined into bars, coins, jewellery, accessories and into units used in industries. In financial terms, Gold is considered a safe haven/ hedge investment, a store of value and a monetary asset. Equity is defined as one’s ownership interest in a corporation in the form of preferred stock or common stock INVESTMENT OPTIONS FOR GOLD
Gold is measured in troy ounces. When the reference to gold is obvious, it is much easier to refer to it as an ounce. One troy ounce is equal to 31.1034768 grams. 1. Bullion Gold Bars – They come in a number of different sizes and weights. These can range anywhere from one gram to as much as 400 troy ounces. Small bars are defined as those weighing 1000g or less. According to industry specialists Gold Bars Worldwide, there are 94 accredited bar manufacturers and brands in 26 countries, producing a total of more than 400 types of standard gold bars between them. Gold bars contain 99.5% fine gold. 1. Bullion Gold Coins – These are issued by different governments around the world. They are used as a form of currency for their face value and not content of gold. However for investors, market value is the sum of the value of its gold content and a percentage that varies between coins and dealers. Their sizes vary from 1/20 ounce to 1000 grams. 2. Gold Exchange Traded Funds – These are open ended mutual fund schemes that invest the money collected from investors in standard Gold Bullion. 3. Gold Certificates – Allow Gold investors to avoid the risks and costs associated with the transfer and storage of physical gold bullion. 4. Gold Accounts – These are accounts, which are available to investors, which hold less 1000 ounces of gold. 5. Derivatives, CFDs and Spread Betting
COMPARISON OF EQUITY AND GOLD
Now a day normally most of the investors will ask “Where should I invest my money to gain more return on investment?” During the year 2006 until 2008 there have a monetary crisis, which is the value of a country currency fall due to political concerns.
Stocks have been a terrible investment over the past decade and they are about to get worse. Gold has been one of the best if not the best investment over the past decade and is about to get better. When you examine investments via relative merits, Gold has trounced general equities. Gold has also trounced paper cash, regardless of the fiat currency held, as well as real estate and commodities over the past decade.
After all the economy crisis, normally investor will trying to invest in gold, with the reason of they define gold as a safe alternative, furthermore gold prices are does very well to hold its price. The price of gold are holding very well it had increasing from 600 dollar per ounce from year 2006 until 1,000 dollar per ounce on year 2008, its definitely increase in a huge amount during this two years.
Furthermore the performance of stock markets are no longer reflective of the world economies, since year 2006 until year 2008, on that time many investors are try to invest in other solid instrument to create wealth during...