FYI: So you have been bitten by the gold bug? Here are six easy ways to add a little gold to any portfolio — and the pros and cons of each. (Sources: GoldResource.net, SeekingAlpha.com, Morningstar Inc. and Kapitall Inc)
Regards,
Ted
1. Mutual Fund
The $70 million Gold Bullion Strategy Investor Fund (QGLDX) is currently the only mutual offering pure-play exposure to the price of gold. Launched 12 months ago, the fund gains exposure to the gold through a 25% allocation to gold futures contracts and a 75% weighting in short-term bonds.
Pros: Liquidity. Also works as an interest rate hedge. No transaction costs.
Cons: Above average expense ratio. Relatively untested strategy.
2. Exchange-Traded Funds
The financial services industry created multiple ways to generate long- or short-exposure to the price of gold. But, keep in mind, whether the various exchange-traded products are offering long or short exposure, they are essentially designed to track the price of gold, as opposed actually owning the precious metal.
Pros: Inexpensive to own and easy to buy, with all-day liquidity. A good vehicle for traders.
Cons:Transaction costs. Most company-sponsored retirement plans still do not offer exchange-traded product
3. Gold bullion
There is no greater commitment to gold investing than direct ownership and possession of gold coins and bullion.
Pros: A sense of security like none other, assuming you have a secure storage facility. The best price you’ll get when buying physical gold.
Cons: There is a mark-up when purchasing bars and ingots, and when selling you might need to hire a professional appraiser. Bullion is also less liquid than coins, and can be difficult to use as an actual currency for smaller purchases.
4. 4. Gold coins
Coins introduce a different level of physical gold ownership because the value is affected by multiple factors, including brand, country of origin, and supply of specific coin brands by location.
Pros: When demand for gold is high, gold coins can sell at a premium to the price of gold. Can be used as currency.
Cons: Easy to purchase, but there is usually a steep convenience upcharge, and the spreads rarely favor smaller investors.
5. Futures and options
Not for the meek or inexperienced investor, trading futures and options is considered among the best ways to make money in gold, assuming you have a solid understanding of how it’s done. It is a strategy best left to the professionals.
Pros: A lot of money can be made without putting up a lot capital, because this is a market designed for speculators.
Cons: You can lose your shirt in a hurry.
6. Gold-mining stocks
A less direct way to gain exposure to the price of gold, mining company stocks generally benefit from rising gold prices, but the correlation can be unpredictable because of other factors driving revenues and profits.
Pros: There is usually dividend income. The stocks can sometimes outperform gold prices.
Cons: Transaction costs for buying and selling the securities. There is always a risk that the company stock prices will move way out of step with the price of gold.
Comments
It's on my bucket list for some future vacation.
Pros: Low investment risk.
Cons: Your shoes and socks get wet a lot of the time.
IMO Have a great day.