Gold Investing With Funds

Reviewed: April 15, 2016
By FinanceWeb

More ans more investors are looking to invest in gold. The reasons are numerous. For thousands of years, gold has been considered as money. Even few decades ago, the American Dollar has been backed by gold. No more.

With the central banks around the world printing money, the inflation is bound to rise. Since the 2008 financial crisis, the Federal Reserve Bank in the United States printed trillions of new dollars.

Since gold is considered to be a hedge against inflation, many investors are looking to add it to their portfolios. What’s more, gold (as well as other precious metals such as platinum, palladium, and silver)is considered to be an asset class on its own, and quite distinct form paper assets such as bonds and stocks.

Also, gold has low correlation with these assets, so it’s considered to a good way to diversify investments. While it’s possible to buy actual gold bars and coins, some investors prefer not to hold them directly as this raises concerns about storage and security. An alternative way to buy it is via gold mutual funds.

These funds specialize in investing in physical gold as well as gold mining stocks. Keep in mind, though, that the rise of stocks of gold miners may not match the actual rise of gold. Nevertheless, gold mutual funds are a way to bet on gold prices and diversify assets.

There are quite many gold mutual funds to choose form. When looking for one to buy, make sure to read the fund’s prospectus or, at least, its fact sheet. It will tell you exactly how the gold mutual fund invests the funds of its shareholders. Looking at the management fees is also crucial as these reduce the returns.

For those looking to bet on other precious metals, there are mutual fund that invest in a variety of these metals. There are also gold Exchange-Traded Funds (ETFs). Many specialize in gold bullion alone. There are actually two kinds of these. One buys and stores actual gold (or other precious metals), the other is based on futures contracts.

The former actually will match the fluctuations of gold prices (less management fees), while the latter (futures-based) may not do so. And there are leveraged futures-based funds, but these are speculative in nature. Some of these even allow for betting against gold prices.

If you’re looking for gold investment for the long-term, then the gold mutual funds or physical gold ETFs are an option for you.