How to Invest in Gold Mutual Funds

Gold mutual funds invest in equity securities issued by companies that mine or distribute precious metals. With a gold mutual fund, you can invest in many different stocks, diversifying your investments. Since a professional with experience and expertise will manage your gold mutual fund, you won't have to worry about making critical decisions yourself. You can seek to meet your investment objectives with someone else in the driver's seat.

Difficulty: Moderately Easy

Instructions

Things You'll Need:

• Internet access
• Financial adviser
• Money to invest

Research Gold Funds

1. Consult with a trusted financial adviser concerning gold mutual funds and the portion of your portfolio you should commit to them.

2. Understand that, like all commodities, gold is considered a volatile investment.

3. Recognize that investing in gold can provide stability, even when the economy is shaky. Many investors use gold funds to protect against loss. In this way, some may view gold funds as investment insurance policies.

4. Perform thorough research on gold funds before you decide to invest. Compare gold funds online at MorningStar.com or LipperWeb.com.

5. Recognize the significant differences in available gold funds. Review them according to investment style, strategies and objectives. Also, pay close attention to fund loads, expense ratios, sizes, turnovers and net asset values.

6. Realize that some gold funds are more aggressive, while others may take a very conservative approach. Consider the type of approach that will fit best with your objectives and risk tolerance level.

Understand Gold Mutual Funds

7. Know that, though gold is a tangible asset, You will not take possession of it when you purchase shares in a gold fund. Instead, the mutual fund will hold the gold for all the fund's investors.

8. Recognize that gold offers high liquidity. This means you can easily convert gold to currency.

9. Realize that gold mutual funds sometimes move along with the price of gold. However, this is not always the case.

10. Remember that highly aggressive mutual funds take on more risks than their conservative counterparts. However, aggressive funds may offer more chances for significant financial rewards.
    

11. Realize that gold is not a risk-free investment. Like other types of stocks, gold stocks can perform poorly.

Tips & Warnings

• Approximately 2,500 tonnes (metric tons) of gold were produced worldwide in 2005. In that year, gold production barely managed to keep up with demand.
• In 2005, the leading producers of gold were South Africa, Australia, Latin America, the United States and China.