Gold ETF - Diversify Your Portfolio with Gold

Gold mutual funds and gold company ETFs are a good way to diversify your portfolio, but one of the disadvantages is that the price of the gold companies don’t always track exactly with the price of gold. But if you want an investment that will do that, but don’t want to hold gold itself, there is an alternative. Here’s a look a the gold ETF.

The Gold ETF: Maybe The Best Way To Own Gold
By Larry Holmes

Let’s start off with the assumption that you want to own gold. You want to own gold as a hedge against inflation. You want to own gold as a hedge against a declining currency, like the U.S. dollar. And you want to own gold — well, for the same reason you would make any investment — because the price is likely to go a lot higher in coming years.

But how do you own gold? Until this year you had two basic choices: You could own the metal or you could own shares of gold mining companies (for the purpose of this discussion I’m leaving out gold futures). The disadvantage of owning the metal is that it’s not convenient. You have to store it and insure it. That’s a pain. And the transaction costs can be high when you go to buy or sell it.

The disadvantage of owning the shares of mining companies is that you own a stock. And you have all the risks that you would have in owning any stock. Management may make poor decisions. Increased operating costs could hurt earnings. The price of the stock could go down while the price of the metal goes higher, etc.

There’s a third way to own gold. And it may be the best way. StreetTracks Gold Trust (symbol: GLD), makes purchasing gold just as easy as buying shares of Microsoft or Starbucks. It’s innovative and it offers a very liquid and cost-effective way to invest in an important asset that, until now, was not available to individual investors. In fact, it is so innovative and such a major advancement that it will dramatically change the way investors look at investing.

Here are some relevant facts about GLD…

  • The investment objective of the Trust is for the shares to reflect the performance of the price of gold bullion less the expenses of the Trust’s operations. The shares are designed for investors who want a cost-effective and convenient way to invest in gold.
  • One unit (share) of GLD represents 1/10 of an ounce of gold. For example, if gold is at $470 an ounce, the shares will be priced at approximately $47.
  • GLD trades on the New York Stock Exchange.
  • It trades at a very small premium or discount to gold at any given time — usually less than 1%.
  • Expenses are low — currently 0.4%
  • GLD is very liquid. There are 66,900,000 shares outstanding. Average daily volume is almost two million shares. Assets are currently valued at $3,155,106,000. And that’s after less than one year of trading.

  • The StreetTracks Gold Trust has been one of the most successful new financial vehicles ever launched. And for good reason — GLD is a great way to buy and sell gold.

    Copyright 2005

    Larry Holmes invites you to visit
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    Filed under ETFs - Exchange Traded Funds

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