The Motley Fool

Forget gold! This is why ASX shares are a better buy

In times of economic uncertainty investors often flock to the safe haven of gold and flee out of ASX shares. In the past 12 months, the gold price has increased by 26% compared to the S&P/ASX 200 (INDEXASX: XJO), which is up 21% excluding dividends.

While the overall index of the top 200 Australian companies has lagged the gold price, there have been star performers over the past 12 months:

Unfortunately, there is no guarantee that all share selections will soar like the ones mentioned above.

But there is also the potential for massive share price growth.

In the past 30 years, according to the Vanguard 2019 Index Chart, Australian shares has delivered a return of 9.4%p.a. So, $10,000 invested in 1989 with no acquisition costs or taxes and all income reinvested will be worth a sizeable $146,337 in 2019, as per Vanguard. This is despite different governments and many economic shocks.

The price of gold has risen by 345% in Australian dollar terms in 30 years, as can be seen by the chart below:

gold price

Source: https://goldprice.org/

The downside to gold is that it doesn’t provide cash flow unless you sell. In comparison, you can own shares that pay you dividends and deliver share price growth. When you include dividends in the return of the ASX 200, it bumps up to 25%. This only just lags the performance of gold in the last 12 months.

When speaking about gold, Warren Buffett once said “It doesn’t do anything but sit there and look at you”. Actual physical gold does just that, but an investment in an ASX gold company directly can provide you with dividends and potential share price growth. Gold is also used in consumer products.

There are several options to invest in gold. You could buy physical gold, a gold ETF like ETFs Physical Gold (ASX: GOLD) or buy a gold listed ASX company like Newcrest Mining Limited (ASX: NCM). The downside of owning actual physical gold is the storage cost and the stress of keeping it safe..

Foolish takeaway

It’s strange to see the ASX 200 and the gold price delivering similar returns in the past 12 months. While gold doesn’t provide cash flow unless you buy a dividend-paying company in the gold industry, ASX shares can deliver consistent and growing income streams for investors looking for passive income even through uncertain economic times.

If you're staying away from the gold sector, here are 3 top dividend payers to consider instead.

Top 3 Dividend Shares To Buy For 2020

When Edward Vesely -- our resident dividend expert -- has a stock tip, it can pay to listen. With huge winners like Dicker Data (up 126%) and Collins Food (up 79%) under his belt, Edward is building an enviable following amongst investors that are planning for retirement.

In a brand new report, Edward has just revealed what he believes are the 3 best dividend stocks for income-hungry investors to buy now. All 3 stocks are paying growing fully franked dividends giving you the opportunity to combine capital appreciation with attractive dividend yields.

Best of all, Edward’s “Top 3 Dividend Shares To Buy For 2020” report is totally free to all Motley Fool readers.

Click here now to access this free report.

Motley Fool contributor Matthew Donald has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

FREE REPORT: Five Cheap and Good Stocks to Buy now…

Our Motley Fool experts have FREE report, detailing 5 dirt cheap shares that you can buy today.

One stock is an Australian internet darling with a rock solid reputation and an exciting new business line that promises years (or even decades) of growth… while trading at an ultra-low price…

Another is a diversified conglomerate trading near a 52-week low all while offering a 2.7% fully franked yield…

Plus 3 more cheap bets that could position you to profit over the next 12 months!

See for yourself now. Simply click the link below to scoop up your FREE copy and discover all 5 shares. But you will want to hurry – this free report is available for a brief time only.

CLICK HERE FOR YOUR FREE REPORT!