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Both gold and income stocks are down, but I know which one to buy. I think FTSE 100 Dividend stocks are a much better way to build long-term wealth than buying precious metals.
As the world lurches from one crisis to another, the price of gold must be reeling right now. It’s supposed to be a safe haven in times of trouble, but it’s falling apart along with everything else.
I am now looking to buy FTSE income shares.
Gold is down 14.53% in six months to trade at $1,638 an ounce. Stock markets have also been volatile, but I expect that. Stocks are known to fall in difficult times, but gold rises and does not rise.
Gold has been a store of value for almost 4000 years but now it has been usurped by the US dollar. The greenback is up 26.16% year-to-date against the pound, 25.36% against the Japanese yen and 18.02% against the euro.
This is a problem because gold is sold in dollars. About half of the total demand for gold comes from China and India, and consumers in these two countries are buying as prices rise.
Gold also pays almost no interest, and that looks attractive as interest rates rise and rival safe havens like cash and bonds offer higher yields. As income shares.
Today, the FTSE 100 yields 4.14%, with many stocks yielding between 6% and 12% on the index. That rate of return gives me a better chance of protecting my portfolio against inflation. Gold cannot do this, because it does not pay any income.
Better still, FTSE shares should offer increasing returns as companies tend to increase their payouts from time to time. Of course, this income is not guaranteed. Dividends can be cut at any time. However, by investing in a spread of income stocks, I can mitigate the damage if one or two firms cut or stop paying their shareholders.
The shares look cheap to me
Income stocks are also trading attractively as stock prices fall again. Now, the FTSE 100 trades at just 13.53 times earnings. Of course, gold also seems cheap. It is 20% below the all-time high of $2,084 reached in August 2020. That tempts bargain hunters and I get that.
I can hold 5% of my portfolio in gold for diversification. But most of my retirement savings are directed into FTSE 100 income shares. They may not offer as much capital growth as I would like, but there are consolations. Those dividends still come my way when the market struggles.
I used to make a beeline for such banks Barclay And Lloyd’sIt yields 3.73% and 4.47%, respectively, and trades at 4.32 and 6.16 times earnings alone. Glax Yields are up to 7.56 percent and are valued at just 11.6 times earnings, which is the cheapest I’ve seen in years. Admiral It yields 6.93% and is valued at 10.52 times earnings. These are good income streams, and the FTSE 100 is full of similarly bargain dividend stocks.
Today I reinvest my shares for growth, and one day take them as income to supplement my retirement. That’s why income stocks are at the top of my buy list.