Store of Value

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What is a Store of Value?

The term store of value refers to a currency, commodity, or asset that remains stable or increases over time - maintaining its value without depreciating. Property, gold, and interest-bearing assets such as U.S. Treasury Bonds are examples of a store of value.  

Key Takeaways

• A store of value is a currency, commodity, or asset that avoids depreciating over time.
• To be considered a store of value, the asset must remain stable or increase.  
• Store of value examples include gold and real estate.  

What makes a good store of value?

Because a store of value is expected to retain its value long term, there are certain factors that impact whether an asset or commodity is considered a good store of value. These include scarcity, durability and the overall convenience of an asset.

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Examples of Stores of Value

Although there are many assets that can serve as a store of value, which asset best serves this purpose will depend on factors such as an investor’s personal preference, as well as current market dynamics.  

Bitcoin

Within a relatively short time frame, Bitcoin has transformed from being a purely speculative asset to digital gold.  

The world's most popular cryptocurrency has attracted both retail and corporate investors, with American software company MicroStrategy currently holding more than $5 billion worth of Bitcoin in reserve for their corporate treasury.  

What makes bitcoin a good store of value?

• With Bitcoin supply capped at 21 million, many investors consider Bitcoin to be a scarce commodity.  

• Because cryptocurrency markets trade 24/7, Bitcoin is relatively liquid. Bitcoin is also fungible and can be divided into 100,000,000 Satoshis.  
• Due to operating on a decentralized network, its supply cannot be inflated.

 
Index Funds/ETFs

Who knows more about index funds than Warren Buffet?  

Convinced that an S&P 500 index fund would beat the returns of an actively managed hedge fund over 10 years, he made a $1 million bet, and won.  

Because index funds offer portfolio diversification and track the performance of a market over time, they offer investors an attractive store of value.

What makes index funds a good store of value?

• Index funds and ETFs allow investors to gain access to equity markets while automatically diversifying their investment portfolio.  

• Index funds are extremely liquid and can be easily exchanged for fiat currency.  
• Index funds offer investors both portability and divisibility.

Gold

Precious metals such as gold and silver have been used as currencies throughout history because of their ability to store value. Up until 1971, the United States was on a gold standard, allowing dollars to be redeemed for a specific weight of gold.  

Although president Richard Nixon put an end to dollar convertibility, opting instead to use a fiat currency, gold remains a popular store of value.  

What makes gold a good store of value?

• Because it is a finite resource, gold is a scarce commodity.  
• Gold is extremely durable and does not lose its value when divided.
• Easily exchanged for alternative forms of currency, gold offers investors a convenient store of value.  

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