How to Invest in Gold ETFs

Where should you invest when inflation is high and markets are volatile? Many already have the answer the gold.

“Gold, in general, is considered a hedge against currency risk, and the headlines seem to be that America’s currency risk is taking some dire turns,” said Thomas Maluk, a certified financial education instructor.

But how do you invest in gold? If you’re not too interested in buying, storing and protecting metals, below we’ll look at how to invest in gold ETFs — and what gold investment experts have to say about them.

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What is a gold ETF?

A Gold Exchange Traded Fund (ETF) is a form of investment security that provides investors with convenient electronic access to the gold market — eliminating the need to buy, hold or secure physical gold. The underlying assets of gold ETFs vary depending on the fund you choose, but asset management companies often buy and hold gold bullion (of 99.5% purity) and aim to track domestic physical gold prices.

Alternatively, some will buy stock in companies involved in gold production, such as gold mining companies.

In either case, gold ETFs can be easily traded like stocks on exchanges and will rise or fall in value based on the performance of the underlying assets.

Who benefits from investing in Gold ETFs?

Gold ETFs give investors a convenient way to access the gold market.

“One of the main advantages of investing in gold ETFs is the relative liquidity and portability of ETFs. If you build a position in gold through an ETF and decide to close your position months or years from now, you simply sell. Do. Share and move on,” says Maluk.

“Whereas, with physical gold,” he added, “you have to find a seller, maybe transport the physical gold from your property, maybe pay a fee to a precious metals dealer, provide authentication for the purity of your gold, and Much more.”

Beyond the convenience factor, gold ETFs are often considered a safe haven during times of geopolitical unrest, economic uncertainty. Inflation. “Gold is a great investment for those who want to keep what they have and make their investments a little more stable,” says Patrick De Cesare, a certified financial education instructor and owner of Basic Financial Literacy.

Learn more about your gold options with a free investment guide.

What are the disadvantages of gold ETFs?

While gold ETFs can be convenient and hedge against inflation, they fall short when it comes to returns.

“Those looking to grow their money should look at the overall stock market, like the S&P 500,” says De Cesare. “Comparing a gold ETF, OUNZ, and the S&P 500, the S&P 500 has won by 1.1% this year. When you zoom out on the five Year to date, the S&P 500 gains 5%.”

It’s also important to understand the expense ratio so you don’t lose too much in fees. “Keep in mind that gold trust ETFs sell a small amount of their gold to cover expenses, which creates a taxable event for you if the ETF is held in a taxable account,” Maluk explains.

“Precious metals are also taxed at high capital gains rates, including a long-term rate of 28%, much higher than stock-based securities,” he added.

How to Invest in Gold ETFs

You can invest in gold ETFs the same way you would buy other stocks and funds — using an online brokerage, stockbroker, robo-advisor, etc. However, not all gold ETFs will offer the same returns.

Be sure to consider factors such as underlying assets, performance over the past five years, net asset value, expense ratio, liquidity and tax implications. Most of these are available in each fund’s prospectus or on the ETF’s website SEC’s EDGAR database.

Learn more here now.

Know other gold investment options

If a gold ETF isn’t right for you, here are a few gold investment options to consider.

• physical gold: Buying physical gold Involves finding a trusted vendor, acquiring it and storing it safely.
• Gold futures: Gold futures A centralized exchange deals between buyers and sellers where investors place bets gold price At some point in the future. They may be less liquid But there are no management fees. Further, taxes are divided into long term and short term capital gains.
• Gold Mutual Fund: Gold Mutual Fund Buy shares of companies in the gold mining industry. They may carry higher fees and commissions to trade than ETFs.
• Gold IRA: Gold IRA Tax-advantaged retirement accounts that allow you to invest in gold with an eligible guardian. Going this route, you’ll be subject to IRA contribution limits and restrictions. Now check your gold IRA options here.

Gold ETFs can be a convenient way to access the gold market, but they are not without costs and risks. It can be extremely beneficial to have your gold investment plan run over by a financial professional to ensure you fully understand Advantages – Disadvantages of your options.