Gold Funds: Best Investment Options For Your Portfolio

Gold exchange-traded funds (ETFs) are a popular investment option for those looking to diversify their portfolios and hedge against market volatility and inflation. Gold ETFs can be categorised into two types: those that own physical gold and those that own gold mining stocks. When selecting a gold ETF, investors should look for large assets under management (AUM), low expense ratios, and no leverage. Here are some of the best gold ETFs to consider:

- SPDR Gold Shares (GLD)

- iShares Gold Trust (IAU)

- VanEck Vectors Gold Miners ETF (GDX)

- VanEck Vectors Junior Gold Miners ETF (GDXJ)

- SPDR Gold MiniShares Trust (GLDM)

- iShares Gold Trust Micro (IAUM)

- GraniteShares Gold Trust (BAR)

Best gold ETFs for October 2024

Gold is a popular investment for those looking to hedge against stock market uncertainty and inflation. Gold ETFs are a convenient way to gain exposure to the precious metal without directly purchasing, storing, and reselling gold. Here are some of the best gold ETFs to consider for October 2024:

SPDR Gold MiniShares

SPDR Gold MiniShares (GLDM) is an attractive option for investors seeking a smaller entry point into the gold market. It typically trades at a lower share price compared to other gold ETFs, making it accessible for retail investors. Despite its smaller market cap, GLDM has demonstrated consistent returns over time.

IShares Gold Trust

The iShares Gold Trust (IAU) has a substantial market cap of around $31.71 billion. It offers investors exposure to the price of gold by tracking the performance of physical gold bullion held in trust. IAU has competitive expense ratios and consistently tracks gold prices, making it a compelling choice for investors seeking stability and long-term growth potential.

Abrdn Physical Gold Shares ETF

Abrdn Physical Gold Shares ETF (SGOL) has a market capitalization of $3.76 billion and offers a compelling investment opportunity. It boasts impressive one-year and five-year returns of 44.23% and 73.98%, respectively. SGOL is an attractive option for investors seeking exposure to the gold market.

Franklin Responsibly Sourced Gold ETF

Franklin Responsibly Sourced Gold ETF is one of the best-performing gold ETFs. However, specific information about its performance and characteristics was not readily available.

VanEck Vectors Gold Miners ETF

The VanEck Vectors Gold Miners ETF (GDX) is the largest ETF focused on holding shares of major gold mining companies. It has about $14.9 billion in assets and held shares in 60 gold mining companies as of mid-2024. GDX provides investors with a diverse, high-quality group of large-scale gold companies and has a reasonable expense ratio of 0.51%.

VanEck Vectors Junior Gold Miners ETF

The VanEck Vectors Junior Gold Miners ETF (GDXJ) focuses on smaller mining companies, known as junior gold miners, some of which are still in the exploration stage. These smaller miners could offer higher returns than their larger rivals, but they also carry more risk. GDXJ has a relatively low expense ratio and provides investors with broad exposure to several up-and-coming gold and silver mining stocks.

SPDR Gold Shares

SPDR Gold Shares (GLD) is the largest and most liquid gold ETF, with a market capitalization of approximately $71.17 billion. Its popularity stems from its direct correlation to the price of gold bullion. GLD has a higher expense ratio than other gold ETFs, but its large size makes it a favorite among institutional investors.

Gold funds vs physical gold

Gold has long been considered a safe haven for investors, a way to hedge against currency devaluation, inflation, or deflation. There are several ways to invest in gold, including buying physical gold from a gold dealer or investing in gold funds. So, what are the key differences between these two options, and which is the better choice?

Advantages of Gold Funds Over Physical Gold

• Liquidity: Gold funds offer higher liquidity than physical gold, allowing investors to buy and sell shares quickly through financial markets without the logistical challenges of physical gold transactions.
• Cost: Gold funds have lower costs over time compared to physical gold. Physical gold incurs costs related to storage, insurance, and dealer markups, while gold funds have lower management fees.
• Diversification: Gold funds can spread risk across various gold-related investments, providing broader exposure to the gold market.
• Ease of Trading: Buying and selling gold funds is easier and more straightforward than dealing with the physical asset.
• No Storage Worries: Gold funds eliminate the need for secure storage, which can be expensive and inconvenient.
• Professional Management: Gold funds are managed by experts who make informed decisions on behalf of investors, particularly beneficial for those less familiar with the gold market.

Advantages of Physical Gold Over Gold Funds

• Direct Ownership: With physical gold, investors have complete control and direct ownership of the asset, without concerns about tracking errors or fluctuations in the broader market.
• Tangible Asset: Physical gold provides a tangible asset that can offer a sense of security during economic downturns.

Other Considerations

• Tax Implications: The tax treatment of physical gold and gold funds can differ significantly, depending on factors such as the investor's location and how long they have held the asset.
• Environmental and Ethical Concerns: The mining and extraction of physical gold can have significant environmental and ethical impacts, which may be indirectly supported by investing in gold funds that focus on sustainable and responsible mining practices.
• Counterparty Risk: Gold funds expose investors to counterparty risk, which is not a factor when investing in physical gold.

In summary, both options have their advantages and considerations. Gold funds offer higher liquidity, lower costs, and professional management, while physical gold provides direct ownership and a tangible asset. Ultimately, the decision between investing in gold funds or physical gold depends on the investor's financial goals, risk tolerance, and personal preferences.

Gold funds as a hedge against market volatility

Gold funds are a great way to hedge against market volatility and geopolitical unrest. Gold has a strong track record as an effective portfolio diversifier and a defensive store of value.

Gold exchange-traded funds (ETFs) are one of the most popular ways to invest in gold. They are an easy way to gain instant exposure to the gold market, making them ideal for anyone seeking to invest in gold. Gold ETFs fall into two basic categories: those that own physical gold, and those that own gold mining stocks.

When selecting gold ETFs, investors should look for the following characteristics:

• Large size: The ETF should have at least $200 million in assets under management (AUM). A larger size makes the ETF less likely to fall prey to market manipulation.
• Reasonable expense ratio: Look for an expense ratio of less than 1%. Any expense ratio of more than 1.5% is considered excessive.
• Non-leveraged ETFs: Leveraged ETFs use derivatives and borrowed money to magnify returns, but they also carry much higher risk.
• SPDR Gold Shares (GLD)
• IShares Gold Trust (IAU)
• VanEck Vectors Gold Miners ETF (GDX)
• VanEck Vectors Junior Gold Miners ETF (GDXJ)
• SPDR Gold MiniShares Trust (GLDM)
• IShares Gold Trust Micro (IAUM)
• GraniteShares Gold Trust (BAR)

Gold Mutual Funds are another option for investors who want to accumulate gold as an asset class without having to physically buy gold. These funds invest in Gold ETFs and provide the added advantage of not having to worry about storage costs, safety, and liquidity problems associated with physical gold. Some of the best Gold Mutual Funds include:

• ICICI Prudential Regular Gold Savings Fund (FOF)
• Quantum Gold Savings Fund
• Aditya Birla Sun Life Gold Fund
• Invesco India Gold ETF FoF
• Nippon India Gold Savings Fund

Gold funds as a defensive store of value

Gold funds are a great way to diversify your portfolio and hedge against market volatility and geopolitical unrest. Gold has a strong track record as an effective portfolio diversifier and a defensive store of value.

Gold funds, particularly gold exchange-traded funds (ETFs), are an easy and convenient way to gain exposure to the gold market. They are ideal for anyone seeking to invest in gold without the hassle and expense of buying, storing, and insuring physical gold. Gold ETFs can be purchased through an online broker, just like stocks, and offer instant diversification at a low cost.

When selecting a gold ETF, look for funds with a large asset base, low expense ratios, and no leverage. Here are some of the best gold ETFs to consider:

• SPDR Gold Shares (GLD)
• IShares Gold Trust (IAU/IAUM)
• VanEck Vectors Gold Miners ETF (GDX)
• VanEck Vectors Junior Gold Miners ETF (GDXJ)
• SPDR Gold MiniShares Trust (GLDM)
• GraniteShares Gold Trust (BAR)
• Franklin Responsibly Sourced Gold ETF

Gold Mutual Funds are another option for those looking to invest in gold without the hassle of buying physical gold. These funds invest in Gold ETFs and provide added benefits such as lower storage costs and higher liquidity. Some popular Gold Mutual Funds include:

• ICICI Prudential Regular Gold Savings Fund (FOF)
• Quantum Gold Savings Fund
• Aditya Birla Sun Life Gold Fund
• Invesco India Gold ETF FoF
• Nippon India Gold Savings Fund

Gold has retained its value over the years and is often seen as a safe haven asset during times of economic and political turmoil. However, it's important to note that gold prices can be volatile in the short term, and there may be better long-term returns in other investments such as a diversified portfolio of stocks or stock ETFs.

Gold funds as a hedge against inflation

Gold funds are a type of investment that centres on gold as the underlying asset. They are often considered a hedge against inflation, but this notion is disputed.

Gold is widely viewed as an inflation hedge, a reliable measure of protection against purchasing power risk. As the purchasing power of the dollar declines, gold's value is expected to increase. This is because gold is a finite resource with real-world uses, such as in jewellery and electronics, that provide it with tangible value.

However, gold's effectiveness as an inflation hedge is inconsistent. While gold's value increased by 35% annually during the high inflation of the 1970s, it fell by 10% on average each year from 1980 to 1984 when inflation averaged 6.5%. Similarly, from 1988 to 1991, gold prices fell by approximately 7.6% annually while inflation averaged about 4.6%.

Gold's responsiveness to inflation depends on the magnitude of inflation itself. During periods of high inflation, gold has the potential to become a potent hedge. However, when inflation is moderate or low, gold may not be a responsive hedge.

Gold funds can be a good investment option for those looking to diversify their portfolios and hedge against market volatility. They are a convenient way to gain exposure to gold without the hassle and costs associated with physically buying, storing, and reselling the metal.

• SPDR Gold Shares (GLD)
• IShares Gold Trust (IAU)
• VanEck Gold Miners ETF (GDX)
• GraniteShares Gold Trust (BAR)
• Franklin Responsibly Sourced Gold ETF
• IShares Gold Trust Micro
• SPDR Gold MiniShares Trust

It is important to note that investing in gold funds carries risks, including price volatility, difficulty in valuing gold, lack of cash flow, and potential tax implications.

Frequently asked questions