Which Is Better Gold Mutual Fund or Gold Itself?
While investing in gold is a useful alternative, it carries with it a number of important considerations. There are several methods to gain exposure to precious metals--and some strengths and drawbacks.
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Bullion
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Physical gold (or any precious metal) can be obtained from gold dealers worldwide in forms ranging from small coins to large bars. A commission is attached to a sale, which can be cost prohibitive for smaller transactions.
Possession
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Once acquired, the metal needs to be delivered and stored. Dealers can arrange and expedite this for you unless you are buy locally and in small quantities.
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Mining Stocks
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Metal mining companies worldwide have fixed costs to harvest the metal. When the price for the metal is higher, company profits will be greater. Individual investors and many mutual funds own shares of these companies.
Mutual Funds
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"Precious metal" mutual funds selectively focus on the gold and silver industry. Fund managers are familiar and well-versed in this area and create a portfolio of mining stocks and bullion certificates for shareholders.
Options
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Closed-end mutual funds, such as Central Fund of Canada (ticker: CEF) own physical gold and silver bullion. Shares trade similar to stocks. Since the 1990s, exchange traded funds have gained notoriety. The streetTRACKS Gold Trust Shares (ticker: GLD) is an ETF which also holds physical metal.
Costs to Buy
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The amount of money required to purchase physical gold is straightforward--the cost of the bar, plus commission and delivery, if any. Mutual funds have differing minimum investments and closed end funds and ETFs can be bought with smaller amounts of money, plus a small commission, through a broker.
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