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Gold Mutual Funds: The Investors Great Gold Rush

by bryan blackstone

Gold is regarded as one of the best physical assets that a person could invest in. Through the entirety of its existence, gold remains as one of the most sought-after metals known to retain its market value, and an insurance against other types of investments that are not stable. However, keeping physical gold, whether they are in the form of coins or bullion, can be extremely dangerous, especially for investors. Hence, as a solution to this issue, many investors prefer to invest on gold mutual funds than actually owning tangible gold holdings.

Gold mutual funds are funds that permit investors to invest and directly purchase gold from organizations that produce, process, distribute and mine such kind of precious metal. Similar to other types of mutual and exchange-traded funds (ETFS) such gold investments are operated by managers who invest on securities in behalf of the investors of the funds involved. However, unlike other gold holdings wherein the actual assets are tangible gold, the assets of mutual gold funds are gold securities like stock dividends, mining shares and interest on bonds from gold mining companies.

As stated awhile ago, gold traded mutual funds are spearheaded by a professionally trained investment adviser who manages the general outlook of the fund. The fund manager is the only person who could make all the investment decisions, selects what forms of gold to purchase, which mining companies to invest in, and selects the right period to sell the investments. The main goal of the fund manager is for the gold funds to increase in value so that the shareholders would be able to yield profits.

Investing in gold mutual funds has several advantages over other types of gold investments. To start with, investing on gold traded mutual funds permit investors to diversify their portfolios by allowing them to have an open access to a variety of market sectors that offer significant yields, which in turn helps them hedge market risks by not having all their assets invested on a single market. This is also the ultimate means for people who would like to invest in gold without the difficulties of holding tangible gold but still be able to liquidate the asset in times of need. This is contrary to owning physical gold for investment wherein you are required to verify its weight, purity, quality, and other features. After encountering these things, you would still have to attend to its safekeeping requirements, which, in the case of gold traded mutual funds is totally eliminated.

If you're thinking of putting your resources on gold traded mutual funds, there are some considerations that you need to take note of. You have to take into account that this kind of gold investment is speculative, meaning it is riskier than calculated investments. This simply suggests that the face value of the securities could significantly increase or decrease in value depending on the condition of the market. Therefore, it is vital that you first consult with a reliable financial adviser so that you would gain an insight whether this gold investment option would complement your portfolio.

Once you have established the decision of investing on this gold investment, equally important is that you spare some time to research about the gold funds options you have for you to know which of them is appropriate for your portfolio. Review them according to their investment style, objectives, and strategies. It is also vital that you check on their fund loads, expense ratios, turnovers, and net asset values. By knowing all these factors, it would be easier for you to choose the right mutual fund where you could safely invest your resources.

Gold holdings are among the best tangible assets a person could have. However, personally keeping physical gold isn't a good idea at all considering that it could posit risk to the life of the investor. As a solution to this storage issue, many investors now prefer investing on gold mutual funds instead of holding on physical gold items. In this type of investment, an investor has the opportunity to directly purchase gold from companies that produce, process, distribute, or mine gold, which is then maintained by a professional investment investor.

Published December 16th, 2010

Filed in Finance