Recent volatility has likely seen investors flock to gold in a bid for stability. But bigger gains might be found among embattled S&P/ASX 200 Index (ASX: XJO) shares.
That's despite the new year potentially bringing continuing interest rate hikes and inflation, as well as potential recessions in major economies. Not to mention the ongoing Ukraine war.
Here's why I would turn to buying ASX 200 shares over gold in a bid to retire early despite potential volatility in 2023.
Why I would turn to shares over gold to retire earlier
The ASX 200 plummeted in early 2020 amid the onset of the COVID-19 pandemic before rocketing to an all-time high in mid-2021.
The rollercoaster continued in 2022, with the index dropping 6% year to date amid soaring inflation and resulting interest rate hikes. The index is now back where it was in early 2020.
Meanwhile, the yellow metal's 'safe haven' position as one of the best hedges against inflation has likely driven demand for it. Indeed, the price of gold has risen around 16% since early 2020 to trade at near six-month highs of approximately US$1,815 at last close.
However, if we zoom out to consider, say, the last 10 years, we see a totally different picture.
The price of gold has lifted around 7% over the last decade. While the ASX 200 has posted a near-55% gain in that time. And that's before considering dividends.
That's why I believe shares – while representing greater risk – provide better wealth-building opportunities over the long term. That's particularly important for investors hoping to build a big enough nest egg to retire early.
Why ASX 200 shares in particular?
There are, no doubt, plenty of ASX shares capable of posting returns greater than those of most ASX 200 stocks over the long term.
However, I would be tempted to stick to ASX 200 shares if I were building a diverse portfolio capable of allowing me to retire early.
The ASX 200 aims to measure Australia's 200 largest listed companies.
Because they are generally blue-chip or large-cap stocks, they often have access to greater capital and more concrete competitive advantages. Thus, the market's larger participants can generally weather storms better than their smaller peers.
And 2022's downturn has likely left many trading for bargain prices.
Meaning, I could get on board a quality company for less than I otherwise would have. Thus, hopefully allowing me to sit back and enjoy long-term returns.
Though, no share – ASX 200 or not – is guaranteed to provide returns or downside protection. Additionally, the index's past performance doesn't guarantee its future performance.
