Gold ETF Funds
Gold ETF funds are one of the most efficient ways to buying gold for investment. With Gold Prices Today being over $1000 per ounce of gold, many investors want to know how to invest in gold bullion. There are many ways to invest in gold bullion, including buying gold bullion, buying gold coins, buying stock in gold companies, and investing in gold ETF funds. This article will provide a primer for how to invest in gold ETF funds.
What are ETF Funds?
The first step to learning how to invest in gold ETF funds is understand what are ETF funds. Before investing in any type of investment vehicle, it is important that you understand what you are investing in. ETF Funds are exchange-traded mutual funds.
Ok, so EFT funds are exchange-traded mutual funds, but what does exchange-traded mean? Let’s break this down into smaller pieces. Exchange-traded means that these investment units are traded on the major stock exchanges, like the American Stock Exchange, NASDAQ and New York Stock Exchange. However, ETF Funds are primarily traded on the American Stock Exchange.
The funds part of ETF Funds means that these are investing vehicles that hold many companies. When you invest in ETFs you are not buying a single company, but instead a bunch of companies.
What are gold ETF funds?
Unlike mutual funds, gold ETF funds allow you to invest in gold itself. Gold ETF Funds buy gold and in exchange for such gold deposits the gold ETF funds issue shares in baskets. The purpose of gold etf funds is for its shares to mirror the price performance of gold bullion. Therefore, if the price of gold bullion goes up 10%, the gold etf funds share price would also go up 10%. These gold ETF funds allow investors to invest in the gold market buy buying securities as opposed to purchasing phyical gold bullion.
Why gold ETF Funds are an efficient way to buy gold?
Buying gold bullion presents many costs that make it difficult for the average investor to purchase gold bullion. If you buy gold bullion yourself, you will have to deal with the logistics of buying gold bullion, the storage of gold bullion, insuring your gold bullion, and the cost to eventually sell it. These high costs in buying gold bullion often prevent people for investing in gold. However, gold etf funds solve this barrier of entry problem for buying gold bullion.
The logistics of buying and selling gold bullion is take care of for you by the gold ETF funds. All that gold etf investors need to buy are ETF shares. Investors in Gold ETF funds do not have to worry about storing the gold or insuring the gold. The gold ETF funds purchase the physical gold, take care of the storage and buy insurance policies covering the gold.
What are the benefits of gold ETF funds?
Gold ETF Funds offer a lot of benefits to people who want to invest in gold. These benefits include,
Easy to purchase gold ETF shares – Gold ETF funds make it really easy to invest in the gold market. Through your brokerage account you can buy and sell your ETF shares any time of the day. Compare this to buying gold bullion where you have to find a gold dealer, drive to the gold dealer, and then purchase a fixed amount of gold bullion. But let’s say that you only have $1000 to invest in gold. At today’s gold prices you might not be able buy one gold ounce. Therefore you couldn’t buy it. But buying ETF shares allows you to buy fractional amounts of gold bullion.
Gold ETF funds are cost efficient – Another benefit of gold etf funds is that they are a cost efficient way to buy gold. While you have to pay fees to the gold ETF fund, these costs will be lower than the costs associated with buying phyisical gold yourself. The costs to purchase, store, insure and sell should all be lower making gold ETF funds very efficient for investing in gold.
What are some Gold ETF Funds?
There are many gold ETF funds, but some of the most popular are the SPDR Gold Trust (GLD), Market Vectors Gold Miners ETF (GDX), and ProShares Ultra Gold (UGL).
SPDR Gold Trust (GLD) – The SPDR Gold Trust ETF was the first gold ETF fund. Each share of the SPDR Gold Trust costs one-tenth the price of one ounce of gold. The SPDR Gold Trust ETF purchases gold bullion by buying London Good Delivery Bars which come in 400 ounces of gold bullion.
Market Vectors Gold Miners ETF (GDX) – The Market Vectors Gold Miners ETF is designed to follow the Amex Gold Miners Index which is comprised of 32 gold mining companies. This gold ETF fund allows you to invest in gold mining companies through index investing.
ProShares Ultra Gold (UGL) – If you are looking for a more volatile way to invest in gold, the ProShares Ultra Gold ETF is designed to move twice as much as the price of gold moves. Therefore is the price of gold increases 5%, the ProShares Ultra Gold ETF price should go up 10%.
I hope that this primer on Gold ETF Funds has been helpful. If you have any questions about this article or Gold ETF Funds in general, please ask your questions in the comments below.
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