Is a Gold ETF a Good Investment?
Portfolio diversification is a key consideration for many investors. During a market downturn, like the one we witnessed throughout 2020 due to the global pandemic, many investors turned to gold. Other precious metals also witnessed healthy demand, but gold is generally seen as a safe asset class that is used to hedge market risks. The price of gold rose steadily throughout 2020 and eventually reached its highest point in August. However, many investors want to consider alternatives to buying physical gold. This can have the added advantage of further diversification for your investment portfolio.
A Gold ETF, otherwise known as an Exchange Traded Fund, is essentially a mutual fund that invests in gold. The fund may consider diverse routes of gold investments. These may not be limited to physical gold alone. Many ETFs invest in gold mining stocks, gold manufacturing companies and other gold-related investments. Of course, the fund would also invest in gold bars, coins and other types of physical gold. The fund can also invest in other forms of paper gold, like government bonds. These decisions are made by the fund manager and his team, who can acquire better margins in the market as an institutional investor. Retail investors would generally not have the opportunity to acquire gold at these prices
Buying a gold ETF can be a good investment to provide a safe haven element to your overall portfolio. The value of the ETF should rise when stock markets fall, providing a sound hedge against market downturns. As an electronic investment, it benefits from efficient buying and selling margins, but also poses additional counterparty risks that coins and bars do not.
Additionally, a gold ETF may be able to provide you with some additional benefits, listed below:
Physical Gold is one of the most reputed gold dealers in the country and our advisory team can assist you in making the best gold investments. Call us today on (020) 7060 9992 or reach out to us online via our website.