Your Guide to Investing in Gold Through Funds

When it comes to investing, diversification to mitigate risk is the name of the game.  Savvy investors lean toward gold funds as opposed to individual gold mining stocks.  Gold funds have diversified holdings, ensuring the value of the fund holds steady even if one or two individual holdings substantially decline.  Invest in gold funds today, hold them for the long haul and you are nearly guaranteed to make money in due time. Here is a quick look at the different ways to spread out your risk across gold rather than parking your money in a single gold mining stock. 

Gold Funds

Gold funds are best described as open-ended mutual funds.  This is an opportunity to invest in gold ETF units.  There is no need to establish a demat account to trade gold funds.  Demat is short for dematerialized.  Such accounts are often used to hold onto specific financial securities in their electronic format.  Rather, any investor can buy a gold fund and redeem gold funds similar to the manner in which mutual funds are traded.  The advantage of gold funds is they diversify investment risk across several gold mining stocks and other gold-related publicly traded businesses.

Consider the Merits of Gold ETFs

ETFs are one of the hottest investment vehicles around.  ETF is short for exchange-traded fund.  ETFs are listed on the top exchanges, making it easy for everyday investors to scoop up ETFs with myriad gold stocks and add to their nest egg as time progresses.  A single unit of a gold-based ETF equates to half a gram of 24 kt gold.  Gold ETFs are quite fluid, meaning they can be traded and liquidated as desired.  The price of gold ETFs is primarily dictated by the price of actual gold.  However, there is no need to pay a premium to buy or sell.  Rather, gold ETFs provide the opportunity to buy/sell at gold’s actual market price.

International Gold Funds

Though there are not many international gold funds in existence, every serious investor should consider them.  This approach to investing provides the opportunity to purchase units of gold funds at the international level.  Though mutual funds experts insist international gold funds are comparably risky, they also have the potential to produce significant gains.  As long as you have a general understanding of international markets, you should consider investing in international gold funds.

What About Multi Asset Allocation Funds?

Multi asset allocation funds are those that cannot be classified as a mutual fund nor an ETF or any other form of gold investment.  This investment is best described as a mixture of the categories detailed above.  Multi asset allocation funds invest at least 10% of the portfolio value in a minimum of three asset classes.

The majority of multi asset funds are primarily allocated to gold.  Though gold is the primary investment of such asset funds, there are some mutual fund heads insist multi asset allocation funds do not actually provide the proper level of allocation to gold.  Some such supposed investing gurus insist it is better for investors looking for gold exposure to put their money in gold funds and other options as detailed above.  Perform your due diligence before investing your hard-earned money, consider all available options and a prudent investment in gold will ensure your money works as hard for you as you did for it.