Better Buy for 2026: An S&P 500 Index Fund, Gold, or Bitcoin?

The S&P 500 (SNPINDEX: ^GSPC) has historically been an excellent tool for building wealth, averaging annual gains between 9% to 10%.

The last five years have been better than average, and it has helped the S&P 500 total return hit 96% over that time frame. But gold has done even better over the last five years -- up 118% to roughly $4,090 per ounce. Even after falling by more than 30% from its high in just six weeks, Bitcoin (CRYPTO: BTC) remains up over 362% in the last five years.

Some investors may be interested in exploring options beyond stocks and bonds, including precious metals and cryptocurrencies. Here's how you can decide which asset class is the best buy for you in 2026.

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A logical investment choice

There are thousands of companies listed on U.S. exchanges. At first glance, the stock market can appear incredibly complex, random at times, and highly volatile. However, zoom out, and the core principles that drive stock prices upward are earnings and sentiment.

Companies that have been thriving for decades or over a century, like Coca-Cola, didn't get rewarded by investors by accident. Coke's stock has performed well due to earnings growth, which has supported organic expansion, key acquisitions, and a rising dividend -- which Coke has increased for 63 consecutive years. Similarly, investors are excited about high-growth stocks like Nvidia because the company is generating double-digit quarter-over-quarter earnings growth and has a runway for sustaining that growth due to increased hyperscaler spending.

So in this vein, the beauty of investing in the S&P 500 is that it provides partial ownership in hundreds of companies (including the two just mentioned), with a high concentration in a handful of leading companies (like Nvidia).

The S&P 500 has increased in value over time because corporate earnings have risen. Public ownership in corporations is a key element of the global financial system, but is especially important in the U.S.

In the U.S., stock ownership is common, accessible, and an integral aspect of compensation packages and retirement planning.

Key differences between stocks and other assets

Stocks represent value within the fabric of the U.S. financial system, whereas the value of gold and Bitcoin doesn't depend on the day-to-day functioning of global economic systems.

Gold and Bitcoin have no control over their supply and demand. They lack management teams and public financial filings to hold them accountable. Rather, they are at the cross-section of commodities and stores of value. Buying gold and Bitcoin is, in essence, a bet on value outside the fiat currency-backed financial system.

Instead of betting on a company to grow its earnings, and in turn, its value over time, buying gold or Bitcoin are bets that demand will push the price higher through a combination of government, institutional, and retail adoption.

Gold is used as a key reserve among central banks, has a scarcity element, and boasts an extensive historical track record of being a vessel of physical value. In contrast, Bitcoin's digital value stems from its decentralization, security, transparency, divisibility, limited supply, and fungibility.

One of the most attractive elements of gold and Bitcoin is that their value could increase without relying on the U.S. economy, whereas S&P 500 corporate earnings are heavily dependent on it. U.S. citizens who earn wages and engage in commerce with the U.S. dollar depend on the U.S. economy. In this vein, arguably the best reason for owning gold and Bitcoin is as a store of value independent of U.S. success.

Starting points in stocks, gold, and Bitcoin

The S&P 500, gold, and Bitcoin could all be good buys for 2026. There's no one-size-fits-all solution. It depends on your financial goals, existing assets, personal interests, investment time horizon, and most importantly, your risk tolerance.

For example, if your financial portfolio consists only of stocks and bonds and you're looking for other asset classes, then gold and Bitcoin could be worth a closer look. Whereas, if you're looking for more exposure to growth stocks, the S&P 500 could be a solid choice because so much of it is in megacap, tech-focused companies.

A low-cost S&P 500 index fund or exchange-traded fund (ETF), such as the Vanguard S&P 500 ETF (NYSEMKT: VOO), sports a mere 0.03% expense ratio and can be a foundational holding in a diversified stock portfolio.

Gold ETFs, such as the iShares Gold Trust (NYSEMKT: IAU) and SPDR Gold Shares (NYSEMKT: GLD), are straightforward ways to invest in gold through brokerage accounts, eliminating the security, storage, and liquidity risks associated with buying physical gold.

As cryptocurrency has become mainstream, so have crypto-backed ETFs. BlackRock's iShares Bitcoin Trust ETF (NASDAQ: IBIT) was launched less than two years ago and has already amassed over $67 billion in assets. This ETF provides a simple way to invest in Bitcoin through a brokerage account or a retirement account, which has tax advantages compared to an account using a digital wallet through a platform like Coinbase.

Building a diversified portfolio

The best way to approach investment ideas for 2026 isn't to decide whether to buy stocks versus precious metals and/or cryptocurrency. Rather, I think it's far easier to predetermine your desired allocation in each asset class, and then make decisions within each asset class -- for example, buying X stock over Y stock, not a stock versus gold or Bitcoin.

Having only one option within an asset class eliminates decision-making and opens the door to dollar-cost averaging. For example, if you've decided you want to allocate 3% of your portfolio to gold and 2% to Bitcoin, any additional contribution to your investment account can be divided up into these assets like clockwork. You're basically automating the decision-making process. Whereas if 70% of your savings are going into stocks, then you may want to spend more time deciding which stocks to buy.

All told, investors should still prioritize traditional asset classes, such as stocks and bonds, over gold and Bitcoin. However, now may be a good time to take a step back and determine your ideal allocation, and then bridge the gap by investing in gold and Bitcoin through convenient ETFs that can be easily tracked through a brokerage account.

Daniel Foelber has positions in Nvidia. The Motley Fool has positions in and recommends Bitcoin, Nvidia, Vanguard S&P 500 ETF, and iShares Bitcoin Trust. The Motley Fool recommends BlackRock and Coinbase Global. The Motley Fool has a disclosure policy.