A store of value is a medium, object, or asset that can be saved, stored, and retrieved later in order to make purchases or exchange for other goods and services without losing its purchasing power over time. In other words, a store of value should maintain its value or increase in value as time passes.
Historically, gold and silver have been widely accepted as stores of value due to their rarity, durability, and portability. These precious metals could be saved, traded, or used as collateral without significant loss of value over time. In modern times, financial assets such as stocks, corporate bonds, real estate, art, and bitcoin are commonly considered stores of value.
A good store of value should exhibit the following characteristics:
1. Stability: The value of the store of value should be relatively stable and not subject to drastic fluctuations.
2. Portability: It should be easy to transport or transfer from one place to another without significant loss of value.
3. Divisibility: It should be possible to divide the store of value into smaller units for more convenient use.
4. Durability: The store of value should maintain its value over time, resisting wear and tear, decay, or depreciation.
5. Limited supply: A limited supply helps to prevent inflation and maintain the purchasing power of the store of value.
Fiat money is not a reliable store of value due to the risk of inflation and devaluation by central banks. This is why many individuals prefer alternatives like art, gold, silver, or bitcoin for their savings.