Investing in gold or investment funds therefore depends exclusively on your investment goals. If you want to diversify investments, invest in mutual funds. However, if you’re looking for a long-term asset that you can liquidate in no time, invest in gold. Compared to gold ETFs, gold investment funds offer a slightly higher risk because they invest in gold stocks, which tend to be price-sensitive.
Gold stocks are companies that are involved in activities related to gold mining. However, investors depend on the quality of the gold company itself. This means that you depend on basic company performance, the amount of debt the company bears, and the decisions that the company’s management makes. The gold market is highly liquid and there are a number of ways investors can invest in this precious metal, including holding physical gold (in other words, gold coins and gold bars) and exchange-traded funds (ETFs).
When it comes to gold stocks, you need to keep pace with the company’s performance and take a more active investment approach. On stock exchanges, gold investors can easily deposit and withdraw gold investment fund shares during the trading day, making this gold investment liquid. You can either invest in gold investment funds, which are professionally managed, or in gold ETFs, which can be easily traded on the market, similar to stocks. Compared to gold investment funds or exchange-traded funds, gold mining stocks offer investors more direct exposure to the precious metal.
As with gold mutual funds, investing in gold through a gold ETF can be a convenient and accessible way to gain exposure to the safe haven investment. The iShares Gold Trust is designed to generally match the daily price trend of gold bars, and the shares are backed by physical gold. Hopefully, by understanding the different characteristics between gold mutual funds and gold ETFs, you can identify which best suits your investment strategy and financial goals. Gold investment funds can move in a similar direction to the spot price of gold because investments are correlated.
The aforementioned Aberdeen Standard Gold ETF Trust is intended to track the price of physical gold bars. Similar to gold investment funds, the market value of gold ETFs can approach that of the spot price of gold. Investors need to manage their market risk, and gold funds are a great way to diversify your gold investments. However, the risks are mitigated because gold funds are diversified investments compared to gold stocks, which are price-volatile.
Instead of buying gold bars and gold coins, you can buy shares of a gold investment fund or an exchange-traded gold fund. While gold ETFs are financial instruments that track the price of gold, gold investment funds are basically a fund within a fund that can include ETFs, gold mining stocks, and other gold-related assets. The VanEck Gold Miners ETF strives to replicate as accurately as possible the price and return performance of the NYSE Arca Gold Miners Index (GDMNTR), which is intended to reflect the overall performance of companies active in the gold mining industry, before fees and expenses.