Investing in Gold is a great way to hedge your bets against inflation and financial low downs. It is also an excellent way to diversify your investment portfolio.
If you are on this website, then you must be aware of Gold Investments. Who knows? You could be on a fact-finding mission to know the best form of Gold investment.
Read below to know all there is to know about Gold ETFs.
What Are Gold ETFs
Gold ETFs are commodity exchange-traded funds that are used to track down the changes in the price of Gold. It is used to hedge against gold commodity risks.
Types of Gold ETFs
There are two main types of Gold ETFs.
- This type of Gold ETF is based on the investment – They invest in companies that have anything to with Gold, including gold mines. This Gold ETF focuses on gold streaming stock and gold mining stock.
- The Gold ETFs that are generally based on the commodity part of Gold – They seek to detect the changes in the price of Gold.
Why You Should Invest in Gold ETFs
There are several benefits for investing in Gold ETFs.
ETFs are cost-effective as they only have one transaction to be made per trade. This drives down the cost of commissions and managing fees for the investor.
- Taxes on ETF
Based on the structural differences between ETFs and mutual funds, the taxes on gains for ETFs are relatively lower. This is because gains are only taxed after the entire fund is sold rather than after each trade.
On flexibility, ETFs trade throughout the day like equity. Due to that, their prices are continuously updated over the day.
- High level of Accountability
With gold ETFs, the sponsor in charge publishes the assets daily, and this level of accountability is not seen in other mutual funds.
- Passive Management
Gold ETFs don’t require constant management like other gold investment options might need. This is because Gold ETFs have a limit that it barely goes over and so only minimal adjustment is necessary to manage it.
Advantages of Gold ETFs over Other Gold Investments
Why choose to invest in Gold ETFs rather than buy physical Gold or invest in Gold futures contracts?
You could choose to buy physical Gold in either bullions or bars as a means of investment, but the costs associated with this method is far too large. For instance, you’d have to pay for the security of the gold bars. This can be too large a cost, especially if you want to buy and sell on a regular.
On the other hand, futures contracts require you to have a large amount of money as high as $60,000 to jump-start your investment.
However, with Gold ETFs, you have several options on how to use gold ETFs. In addition to that, the amount you need to jump-start your investment doesn’t have to be so large. You and other investors could put together small amounts of capital.