Ways To Buy Gold – Mutual Funds

November 6, 2008 | By | Reply More

Gold Mutual Funds ( Known as Unit Trusts in UK & ors)

Buying exposure to gold through a mutual fund is a relatively simple way to buy gold and enter the market.

Particularly in these highly volatile times there are safety features not all present in the alternatives. Investors money is spread across the spectrum of major producers, junior miners and explorers that operate principally in Africa, North and South America, Canada and Australia.

A well managed gold mutual fund offers investors the safety of exposure to a basket of stocks that would be beyond the financial means of the average retail investor.

As in all investment decisions research is essential. The structure of any gold mutual fund can be found on its website. The first decision to make is whether to choose an aggressive or conservative fund, this clearly is a very personal decision based on your “appetite for risk”

By comparing a funds’ performance relative to the index tracker for gold, the XAU, it is easy to observe those periods where the fund has either out performed or under performed the index.

If the fund has generally outperformed the index especially when it is rising then it is likely to be aggressive and well managed, can be expected to give a profitable return, but the element of risk is heightened in the event of a sudden reversal in the market.

Under performers, especially during a bear phase may still be considered aggressive but have management problems increasing the risk factor.

Conservatively managed funds will virtually track the XAU with very little deviation, they will have lower risk of loss as they are less likely to take significant speculative positions into the portfolio so the upside profit opportunities will not be as great as in a successful aggressive fund.

Check out the locations of the funds investments. If you have reservations about, for example, the political situation, in any country that seems to have a significant weighting of the fund’s holdings then weigh up the pros and cons and omit from your final choice any funds that you are sufficiently uneasy about.

Some gold mutual funds will have exposure to other metal producers, such as silver or PGMs. Have a look at the ratios, then decide whether or not you are comfortable with the mix.

Mutual fund web sites and their sales literature give an enormous amount of information, from historical performance to current investments and their percentage holdings and even the managements CVs and investing principals. They can be easily accessed via Google search.

Unlike other forms of investments that are traded on a supply and demand basis on exchanges, the value of a mutual fund is based upon the total market value of the holdings at periodic intervals and is dependant upon the amount of money investors have in the fund.

Buying and selling takes place between the investor and the fund at specified intervals when the fund is valued.

For this reason mutual funds are known as ‘open ended’ funds as the capital amount invested is constantly varying as the funds share holdings are bought when money flows in or sold to meet fund holders withdrawals.

Other funds and investment trusts are ‘closed end’ as their capitalisation is fixed via the issuance of tradable shares.

The following list of Gold Mutual Funds is not comprehensive, and is only intended as a guide:

  • Mutual Funds
  • American Century Global Gold
  • ING Gold
  • Fidelity Select Gold
  • Franklin Gold & Precious Metals ( A, B, & C)
  • Oppenheimer Gold & Spec Minerals (A, B, C & N)
  • Vanguard Precious Metals
  • Monterey Gold
  • Invesco Gold
  • First Eagle Gold
  • US Global Investors Gold Shares
  • Van Eck International Investors Gold ( C )

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Category: How To Buy Gold

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