How safe are gold mutual funds?
Gold mutual funds have shown strong performance, with various funds offering significant returns in the past year. Amid geopolitical tensions, investing in gold funds can provide stability and diversification to the portfolio, especially during economic uncertainties.
Some of the most trustworthy and well-known gold dealers include JM Bullion, American Precious Metals Exchange (APMEX) and American Hartford Gold.
Gold is among the lowest risk-bearing assets. Most mutual funds invest in the stock market, which makes them riskier than gold investments. However, they are not as risky as direct stock market investments as they are professionally managed by expert fund managers.
| Ticker | ETF Name | 1-year return |
|---|---|---|
| IAUF | iShares Gold Strategy ETF | 13.33% |
| IAUM | iShares Gold Trust Micro ETF of Benef Interest | 13.05% |
| AAAU | Goldman Sachs Physical Gold ETF | 12.94% |
| OUNZ | VanEck Merk Gold Trust | 12.82% |
There is too great of a spread between the price of most jewelry and its gold value for it to be considered a true investment. Instead, the average gold investor should consider gold-oriented mutual funds and ETFs, as these securities generally provide the easiest and safest way to invest in gold.
There are several potential risks to investing in gold, including: Price volatility: The price of gold can be volatile, and it may fluctuate significantly over short periods of time.
So, the question remains: is diversifying into assets like gold an overreaction or a prudent strategy in today's volatile economic landscape? It's safe to say that Ramsey considers it an overreaction. "Everything on the internet is true," he joked about the rush of people leaving traditional banks to invest in gold.
Expense ratio: Gold funds generally have a higher expense ratio compared to gold ETFs, as they are actively managed by a fund manager, which incurs additional costs. The expense ratio for Gold ETFs is comparatively lower as they are passively managed and have fewer operational costs.
So, investing in gold or mutual funds depends entirely on your investment goals. If you want to diversify investments, invest in mutual funds. But if you want an asset for the long-term that you can liquidate in no time, invest in gold.
If you want an investment that provides an income stream, stocks are likely the better choice. Note: You might be able to earn dividends from gold stocks or gold ETFs, but these are riskier than investing in physical gold like bars and coins.
How do I buy gold mutual funds?
Gold Funds
A gold fund is a mutual fund scheme that is open-ended. The investment is done in units of ETFs of gold. This gold investment does not require you to open a demat account. An investor can simply invest and make redemptions out of gold funds like any other given mutual fund.
Although Vanguard does not offer a pure gold fund, it does offer a fund that invests around one-quarter of its portfolio in precious metals and mining companies, providing indirect exposure to this market: The Vanguard Global Capital Cycles Fund (VGPMX).
Fidelity® Select Gold Portfolio.
Gold is often hailed as a hedge against inflation—increasing in value as the purchasing power of the dollar declines. However, government bonds are more secure and have shown to pay higher rates when inflation rises, and Treasury Inflation-Protected Securities (TIPS) provide built-in inflation protection.
Owning physical gold comes as close to eliminating counterparty risk as possible. If it is to be stored, it can be stored in an allocated segregated vault, and if it is stored securely at home then only risk is theft.
You can buy physical gold in many ways, including via reputable gold dealers, private collectors and pawn shops. The price you pay will depend on the purity of the gold in the bar or coin, and the price of gold at that time.
Gold Price Predictions for the Next 5 Years
However, they maintain a bullish outlook on the price of gold for the long term. Traderindo's Laksono has maintained its forecast that gold could trade at between $2,550 to $3,000/oz. He said: “Many things could happen in five years, including global economic crises.
Historical Track Records: Gold vs.
Dave mentions that over the past 50 years, gold has only provided about a 2% rate of return. In comparison, traditional investments like real estate or growth stock mutual funds have shown much more promising returns over the same period.
Experts typically recommend devoting between 5% to 10% of your portfolio to it. "This amount aims to balance the benefits of diversification with the unique risks and fluctuations of the gold market," says Nicholas Ganesh, manager at Endeavor Metals Group.
Buffett, the venerable chairman and CEO of Berkshire Hathaway Inc., has long been critical of gold as an investment option. He views gold as an unproductive asset, highlighting its inability to generate income or compound in value over time.
Does Warren Buffett recommend gold?
Investing legend Warren Buffett has publicly expressed his views on gold on several occasions. He's generally not a fan of the yellow metal. In particular, Buffett often emphasized the importance of investing in productive assets. These are assets that generate income, like stocks, bonds, real estate, farms etc.
Orman also states that investors should put no more than 5% of their money in commodities like gold, silver, or copper. They should only invest funds that they are also willing to lose because commodities are very speculative. Speculative investments carry an extremely high level of risk.
Most experts recommend limiting your gold investment to 10% or less of your overall portfolio. The range between 1% and 10%, however, will often vary based on your age and overall investor profile.
Downsides of gold ETFs include exposure to counterparty risk, annual fees, and the possibility the fund fails to properly track the price of gold. Another drawback is that you don't physically own the gold.
| Category | Shipping Policy | Storage |
|---|---|---|
| APMEX Best Overall | Free for orders $199 and up | Through a partner |
| JM Bullion Best Customer Experience | Free over $199 | Through a partner |
| BGASC Best for Gold Coins | Free over $199 | No |
| Money Metals Exchange Best Overall | Free over $199 | Yes |
