Gold ETFs: Factors To Consider
Investing in gold is a formidable strategy that has stood the test of time as this precious metal has rightfully earned the title of “safe haven,” appreciating in times of uncertainty and providing an effective hedge against dollar devaluation. Unfortunately, this investment strategy hasn’t always been available to all walks of investors given the significant upfront costs associated with purchasing and safely storing physical gold bullion. Recent innovations in the exchange traded product space, however, have made it possible for the average investors to quickly and easily establish exposure to the precious metal. Gold ETFs have seen a surge in popularity as these investment vehicles gives investors cost-efficient access to gold prices, without the hassle of acquiring and storing the metal itself.
Developments in the ETF industry have spawned a handful of products that serve to provide exposure to gold. And while more choices are usually a favorable development for individual investors, it can be quite a daunting task to navigate through all the options and pick the most appropriate one. Below, we highlight six factors to consider when trying to the gold ETF that is right for your portfolio:
Physical vs. Futures
Gaining exposure to gold can be achieved in a variety of ways and one of the most basic questions that ought to be considered first is whether you desire a physically-backed fund or a futures-based product. Investors who opt for a physically-backed instrument should note that the underlying holdings are generally gold bullion, essentially bars of gold stored in a secure vault location. Futures-based products on the other hand achieve exposure through a more indirect approach, by investing in gold futures contracts as opposed to directly purchasing and storing the metal.
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