Young Investors: Should You Buy Barrick Gold Stock or Bitcoin?

Barrick Gold (TSX:ABX)(NYSE:GOLD) may be a far better bet than Bitcoin or cryptocurrencies for young investors looking for value.

| More on:
consider the options

Image source: Getty Images

Young investors should take risks if there’s a good shot at obtaining market-beating results over the long term. If the risk/reward scenario makes sense and time is on your side (you’ve got at least five years to invest), some of the higher-flying, high-growth Canadian stocks may make sense to buy, at least in part. Getting some skin in the game in a company you truly believe in over the long run can result in pretty exceptional results.

But if you’re like many folks who are just looking to make a quick buck by speculating on whatever asset is appreciating at the quickest rate, you should probably hold off. Warren Buffett is all about investing in what you know. When it comes to Bitcoin, Ethereum, and most other cryptocurrencies that are virtually impossible to evaluate, it’s important not to confuse sound investment with speculation.

Bitcoin: A sexy but unproductive asset

Indeed, Bitcoin and other speculative “sexy” assets could implode at any time, leaving the least-experienced investors holding the bag at the expense of the lesser fools, as opposed to the greater fools (that’s based on the Greater Fool Theory, which has nothing to do with The Motley Fool).

If an asset is unproductive and will never generate any cash flows, you’ll be looking at an asset that’s only worth as much as the next person is willing to pay for it. Undoubtedly, there’s novelty in investing in Bitcoin. The same could be said of tulip bulbs back in the days of the Tulip Mania, which many of us tell ourselves we would have never gotten involved in.

When it comes to novel investments, by wary, and if you can’t generate a discounted cash flow model, proceed with caution, as you may be speculating and not investing. As long as you know you’re speculating and not investing, there’s no shame in proceeding ahead with money that you’re more than willing to part with in a worst-case scenario.

Wait, isn’t gold also unproductive?

Indeed, gold is also an unproductive asset.

Unlike Bitcoin, however, gold has been a store of value for hundreds, if not thousands of years. Bitcoin has been around for north of a decade. Still, it has a ways to go before it can be stacked up against the shiny yellow metal.

Even if we were to compare Bitcoin to gold, given the former’s limited track record, Bitcoin still fails to pass the bar as a suitable alternative for gold, at least in my books. Bitcoin has traded like an equity in past market crashes, and I’d argue it’s likely to happen again. Meanwhile, gold has held its value far better than your average stock.

The case for battered gold miners over Bitcoin

The gold standard, I believe, stands strong in the era of crypto.

That’s why young investors may wish to invest in gold miner stocks like Barrick Gold (TSX:ABX)(NYSE:GOLD) over cryptocurrencies and their miners. Again, I’m not against speculating. But if you’re a young investor who wants to get more value for every dollar they’ll put forth; I’d argue it’s tough to match the value proposition offered by Barrick at this juncture.

Gold has been under considerable pressure of late. With gold prices plunging below US$1,750 once again, Barrick and the broader basket of miners has been dragged lower. Barrick stock tanked nearly 4% on Tuesday on a flat day for markets. With shares near their 52-week lows, I’d argue that the stock is dirt cheap, with its modest multiple and its bountiful 1.8% dividend yield.

In an arguably expensive market, Barrick Gold, I believe, shines bright. Barrick is a cheap and productive way to play the mining of an otherwise unproductive asset.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Joey Frenette has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.

More on Metals and Mining Stocks

todder holds a gold bar
Energy Stocks

Canada’s Top Performers: 2 Soaring Stocks That Are Still Buys

Sure, buying light isn't ideal. But when the stock continues to climb, it's far worse to leave it by the…

Read more »

financial freedom sign
Metals and Mining Stocks

Could This Undervalued Stock Make You a Millionaire One Day?

This gold stock has the potential to absolutely explode in share price as it continues to focus on the future.

Read more »

Gold bars
Metals and Mining Stocks

These 3 Gold Stocks May Shine in the Coming Months

The TSX has made a swift enough recovery and looks stable for now, but the market is wary. Another significant…

Read more »

Money growing in soil , Business success concept.
Stocks for Beginners

1 Canadian Mining Stock Worth a Long-Term Investment

There are mining stocks, and then a company like this mining stock, which is far less risky, and with even…

Read more »

A child pretends to blast off into space.
Stocks for Beginners

The Dividend Stock Set to Take Over the TSX

This dividend stock isn't just growing, it's absolutely taking over the renewable energy sector on the TSX. And should keep…

Read more »

Man holding magnifying glass over a document
Metals and Mining Stocks

Check Out This Soaring Stock, up 138% in 6 Months, With More Gains Likely to Come

Here are the top reasons why this top mining stock could continue to outperform the broader market by a wide…

Read more »

Diggers and trucks in a coal mine
Metals and Mining Stocks

1 Canadian Mining Stock to Buy Now Before it Surges

This Canadian mining stock offering a substantial dividend could turn from a risk to a massive reward for value-focused, patient…

Read more »

A miner down a mine shaft
Metals and Mining Stocks

1 Canadian Mining Stock to Buy and Hold Forever

The TSX has a wide selection of mining stocks.

Read more »