Store of Value
BeginnerA store of value is an asset that keeps its purchasing power over time, so it can be saved now and used later without losing much of its worth.
Money lets people separate earning from spending. You can be paid this month and buy something next year. For that to work, the money, or whatever you save in, must hold its value in the meantime.
No asset is a perfect store of value. Cash is safe from price swings but slowly loses purchasing power to inflation. If prices rise by 3% a year, 1,000 kept in cash will buy noticeably less after ten years. Property, gold and broad share portfolios have tended to hold or grow their real value over long periods, but their prices can fall sharply in the short term.
The best store of value depends on how long you need to store it. Money needed in six months is usually best kept in a bank account, where its value is stable. Money not needed for twenty years can be stored in assets that may fluctuate but are expected to outgrow inflation.
People often debate whether newer assets, such as cryptocurrencies, can be reliable stores of value. Their large price swings make them risky for this purpose, even if some holders see them as long-term protection against inflation.
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