Gold can be a great way to diversify a portfolio but needs to be done carefully and with a financial plan. Historically an investment in Gold has been an inflation hedge and a hedge against a depreciating dollar, but we continue to see a rising dollar and high inflation so there is risk involved. GLD is down around 5% YTD 2022 and is down about 17% from its 2022 high; however, Gold can still be a hedge against things like the start of WWIII or China (CCP) invading Taiwan.
With that being said, Investor’s can choose from a few different ways to invest in gold.
1) Sector based Mutual Funds - These fund may invest in mining companies, gold processing companies, or other companies that sell jewelry or are involved with precious metals.
Mutual funds have expense ratios. Gold or precious metals sector funds are not direct investments of gold.
2) Commodity based ETFs - These etfs can hold actual gold. This could be in the form of a widely held fixed trust like GLD. This is tied to the price of gold but trades under symbol GLD. There is an expense ratio and there are some pass thru tax consequences.
3) Precious Metal Trading - investor’s can decide to purchase gold bullion, gold coins or other precious metal coins/bullion. The investments have higher up front commissions and holdings will be charged a storage fee. This type of investment permits an investor the option to take physical possession of their coins, bars or bullion. There can be state taxes, shipping costs, and other fees for taking possession. IRA investments require a taxable distribution to take possession of the gold or other precious metal.