Alternatives to Gold Mutual Funds

Watch out for high markups in the gold market.

Many investors like to keep a small portion of their portfolios in gold and other commodities, and there are many ways to play the gold market. You can, of course, purchase gold mutual funds, but you can also use gold ETFs and gold mining stocks. If you like the security of physical gold, you can invest in gold content coins or add collectible gold lines to your asset base.

Gold ETF

Buying an ETF that tracks the price of gold allows you to profit when the price of gold rises. The ETF that trades under ticker symbol GLD directly tracks the price of gold, making it an excellent way to play the gold market without using a mutual fund. One big advantage of the GLD ETF is that it trades throughout the day, allowing you to watch the price carefully and buy at a price you set. That can be a big advantage in a fast-moving gold market.

Gold Mining Stocks

Buying shares of gold mining stocks can be an excellent way to participate in the gold market without actually buying and holding gold bars in your household safe. You can use the stock screening tools available from your brokerage account to screen for companies in the gold mining and gold exploration industries, then evaluate each stock on its merits before making a final purchase decision.

Gold Content Coins

Buying coins based on their gold content is an excellent way to profit from a rise in the price of gold. If you do want to buy gold content coins it is important to find a dealer who specializes in selling those coins, as opposed to selling coins as collectors' items alone. You also need to check the gold percentage in each coin, then compare that content to the current price of an ounce of gold to arrive at the true value of the coin based solely on the gold it contains.

Collectible Gold Coins

If you enjoy collecting and also want to hedge your portfolio with precious metals, you can invest in collectible gold coins. You need to be cautious, however, since the markups on gold coins can be extremely high. Collectible gold coins are best suited for serious collectors who understand the ins and outs of the coin market. A number of factors unrelated to the price of gold can influence the value of collectible coins. These factors can include the relative rarity of the coin, any specific things that make the coins desirable and the knowledge of the investor making the purchase.

References

• Yahoo! Finance: GLD ETF
• House of Representatives: An Investigation of Goldline