What is a store of value? (Definition and examples)

By Indeed Editorial Team

Published 6 July 2022

The Indeed Editorial Team comprises a diverse and talented team of writers, researchers and subject matter experts equipped with Indeed's data and insights to deliver useful tips to help guide your career journey.

Some assets typically lose value over a period. A store of value refers to an asset or commodity that usually retains its purchasing power over time. Knowing what a store of value is could benefit you if you wish to pursue a career in finance and may help you better understand your financial position. In this article, we answer the question 'What is a store of value?', why it's important and look at examples of a store of value and each of its advantages.

What is a store of value?

In answer to the question 'What is a store of value?', it's usually an asset, commodity or currency whose value doesn't depreciate or decrease, meaning it maintains a stable value no matter how long the period. To consider it as a store of value, the item's value is either stable or increasing as time progresses. As long as an item doesn't depreciate, or has a depreciating value, you can consider it as a store of value.

What is the importance of a store of value?

To further understand the importance of a store of value, it's helpful to understand how it works. A store of value is an asset, currency or commodity that you can save, exchange or convert at a later date while retaining its purchasing power. This is why a store of value has to be something that has the ability to depreciate, as it has to retain its purchasing power by meeting the requirements of a stable or increasing value.

The purpose of a store of value revolves around the avoidance of risk. This means that there's a strong priority on the maintenance of price and avoiding depreciation of value. This is exactly why gold is widely considered a store of value, as you can prolong its value and it's unlikely to diminish in value. If you were to contrast this, you could use the example of milk as something that you wouldn't consider a store of value. This is because milk has an expiration date and it's perishable, making its value finite and depreciative.

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Examples of a store of value

Below, you can find common examples of stores of value, including each of their advantages:

Money

You can consider money to be a store of value because you can utilise it as a way to allocate and save capital. Money is commonly known for its use as a medium of exchange because it carries value between transactions and enables people to hold a valuable resource without a loss of value. You can spend money and exchange it for a range of products and items, such as purchases of food products, clothing products or property. There are several advantages of money as a store of value:

  • Purchasing power: Money as a store of value has the advantage of purchasing power, which is the ability to buy goods using money. This is one of the most valuable advantages of money as a store of value and is a key reason why people typically save money to go towards larger purchases in the future.

  • Durability: The durability of money is another significant advantage. Money's durability means that it can withstand repetitive use without its value depreciating.

  • Universal: Money as a store of value is universal, which means that everyone can successfully use their money to spend, store and exchange it without any loss of value. Money is universal because most people have access to money, earn it and require it to purchase items.

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Currency

A currency is a medium of exchange that a government issues for use across a specific country or region. A strong and valuable currency is typically a sign of a healthy economy. Western currencies, in particular, are often good investments because these currencies don't tend to fall in value significantly over time.

The main advantage of currency as a store of value is that you can very easily convert it from another currency, so you can spend it very quickly when compared to other stores of value, such as property or stocks, that may take considerable time to exchange for cash.

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Precious metals

Precious metals are another way of facilitating trade and saw considerable use before the concept of money became widespread. The most common precious metals are gold, silver and platinum. These metals are scarce, which is why they hold so much value. The main advantages of precious metals as a store of value are:

  • Retention of value: Precious metals retain their value very well. The value of gold, for example, rarely depreciates.

  • Protection from inflation: Another advantage of precious metals as a store of value is that they're not impacted by inflation like other stores of value, such as money, are.

  • Ease of transport: Precious metals are also advantageous as stores of value through their ease of transport. This is an advantage as the transference of precious metals simply involves a physical transference of the precious metals from one location to another.

  • Easily divisible: Another advantage of precious metals as stores of value is that they're easily divisible during transactions.

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Cryptocurrency

Many economists now consider cryptocurrency as a store of value. Cryptocurrency is a system of digital payment that requires no intervention from banks to verify transactions. Some popular examples of cryptocurrencies are Bitcoin and Ethereum. The main advantages of cryptocurrency as a store of value are:

  • Immutable monetary supply: Cryptocurrencies have an immutable monetary supply, meaning that they don't change over time. As it's more difficult to increase the supply of a cryptocurrency, when compared to a regular currency, it can retain its value more easily.

  • Limited supply: Cryptocurrencies have a finite supply, for example, Bitcoin has only 21,000,000 bitcoins available. The scarce availability of bitcoins and other forms of cryptocurrencies ensures that their value remains intact, making them ideal as a store of value.

  • Trustworthy transactions: The use of cryptocurrencies allows for trustworthy transactions. Unlike regular money, which relies upon governments, cryptocurrencies use transparency, self-regulation and accountability to ensure that all transactions are legitimate and authentic.

  • Decentralisation: Cryptocurrencies, like Bitcoin, don't have an owner. This decentralisation enables secure and validated transactions via distributed networks rather than a single authority figure or organisation.

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Agricultural property

Agricultural property has increasingly become popular as a store of value. As agricultural land is so valuable for the economy, regarding the production of food, it's a favourable store of value for many. Unlike other stores of value, like precious metals or cryptocurrency, agricultural property requires maintenance for it to keep its value. Not caring for agricultural property may cause its value to depreciate, making it no longer considered an effective store of value. The main advantages of agricultural property as a store of value are:

  • Consistent value when correctly managed: Agricultural property has the potential to hold great value, as food produce and fresh produce are always in demand, so long as the property is correctly maintained. This is the best way to ensure that the value of the agricultural property is stable and maintained, without the risk of depreciation of value.

  • Limited supply: As the demand for food products and produce is ever-increasing, the physical supply of remaining arable agricultural land is decreasing and is significantly limited. This limited supply is what enables agricultural property and land to be a reliable store of value.

Collectables

Collectables are another store of value that's increasingly popular. Collectables can be a range of items, from watches to special edition coins. These collectable items tend to always have a stable value or an increasing value, which is what makes collectables suitable as stores of value.

The main advantage of collectables as a store of value is that collectables have a limited supply. Much like cryptocurrencies and agricultural land, collectables have a limited supply, which is what maintains their value over time. Collectables are rare, with perhaps only a few editions of an item available for purchase and it's these limited editions that assure the value of the item, as not everyone has access to them. Another advantage of collectables as a store of value is that collectibles tend to be highly desirable.

Related:

  • What is a medium of exchange? (With purpose and benefits)


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