Gold exchange traded funds, also known as gold ETF’s, are a form of publicly traded stock that is valued near market price. These gold exchange traded funds are traded on the international stock market, such as the ones located in Mumbai, New York, London and Zurich. These exchange traded funds are preferred due to their tax benefits and the fact that they have stock like features. They could also be considered like mutual funds, due to their portfolio feature, which holds assets. The only downfall is that, not everyone has the ability to purchase gold exchange traded funds, because they are restricted to authorized participants.
Authorized participants will purchase these gold exchange traded funds on a bulk level, investing hundreds of dollars, which is usually brokered through a third party member. Based on the true market value of gold, you get to own a piece of the valuable metal without having to physically own gold.
ETFs are a great trading vehicle, as it allows you to purchase on a margin or sell early. Gold ETFs are traded at 10% of the value. So if gold is currently running at 1500 an ounce, you would pay $150 per share. For investors looking to get into the gold market, or to simply diversify investment portfolios, this is essentially the most cost effective way to do so. The ability to purchase on margin and still make a decent profit is what has brought gold exchange traded funds to a whole new trading level.
When you are purchasing gold ETFs, you will need to have a broker, who you would need to pay commissions to. All these additional costs need to be considered when you are getting into investing through ETFs. Commodities such as gold have a number of ways of being used to make a profit, with the exception that rise in price. You have gold futures, which work like options, where you make a profit on price increases.
Gold exchange traded funds surely make things easier for the average investor, but it still carries some risks you would need to think about. An ETF is a mutual fund that does not possess the same characteristics of a mutual fund. It still remains to be traded on the stock market with constant price fluctuations based on supply and demand. The largest benefit of an ETF is that you get to sell them short and even buy as little as one single share. The commission prices will also remain the same as what you would usually pay for a regular exchange trade. If you are thinking about getting into gold investing, you should think about the various ways of doing so before getting started.
To recap, you can choose to purchase physical gold, gold future or gold exchange traded funds. Depending on the risk capital you have available, you can get into the gold market by either one of the three methods. There are risks in all forms of investments, so just be sure to take on any losses that may result from your investment ventures.