At SmartCapitalMind, we're committed to delivering accurate, trustworthy information. Our expert-authored content is rigorously fact-checked and sourced from credible authorities. Discover how we uphold the highest standards in providing you with reliable knowledge.
A store of value is something that can be traded and that will also hold value over time. Currencies are one example, since as long as a currency is stable, it can be readily traded in exchange for goods and services, and people can also hold it and rely upon the fact that it will retain its value. While the value may fluctuate over time in response to changing market conditions and other factors, only extreme conditions would cause a complete loss of value.
Currency is not the only thing which can be used as a store of value. Real estate, precious metals, gem stones, and similar assets can be used in this way. In all of these cases, people can exchange these items and hold them for varying periods of time. The value may even rise in storage, and sometimes, one can be held strategically with the goal of it's value going up, as do some people who hold deposits of gold.
The concept is an important aspect of many economies. It allows people to engage in a variety of activities because they can rely upon the exchange of items which will be useful not just immediately, but also into the future. For example, people work in exchange for money, which acts as a store of value, as opposed to things like food, which must be used immediately or lose its value.
Long term economic activities rely upon the exchange of items that have both immediate and long term value. This allows economies to expand and develop over time, as well as to advance. Storing and retrieving items of value lies at the base of many complex activities, such as trading on the stock market, in which people exchange money and stocks in the confidence that both can be retained and later retrieved for sale or transfer.
There is a risk of devaluation with any object being used as a store of value. For example, if someone stores currency in a bank and inflation sets in, the stored currency will lose value. For those who can ride out the inflation, the value may be restored over time as the economy stabilizes. Those who cannot may wind up being the losers. Likewise, things like real estate can decline in value in response to a changing market.