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gold funds

Gold ETF Funds and Gold Mutual Funds - Diversifying Portfolios with Gold

Gold ETFs and gold mutual funds can add some needed diversification to your portfolio. In our series on building high return, low risk portfolios, we have learned that an asset class can be of value to our portfolio if it add to the return, or if it is sufficiently uncorrelated to the rest of the portfolio to reduce the risk without reducing the returns.

One common piece of investment advice is to add precious metals, often specifically gold, to your portfolio as a way to hedge or reduce the overall risk of the portfolio. The rationale, of course, is that gold often moves in the opposite direction of the overall market, as when there is a great deal of uncertainty, or the fear of inflation, or even something as severe as the threat of war, then gold will often move up in value.

Gold Mutual Funds - Are They as Good As Gold?

In a previous post, we talked some about the options mutual fund investors had for investing in gold mutual funds. It turns out there are several options we have, and they are a powerful vehicle for adding diversification to your overall mutual fund portfolio. We covered the diversification effects of gold mutual funds previously, but this study focused on funds using gold stocks, primarily gold mining stocks. But we often get questions related to the performance of gold funds, and how correlated they are to the actual price of gold.

Gold Mutual Funds to Diversify Your Portfolio

In a previous article on gold mutual funds, we explored the impact that holding a postition in gold mutual funds could have on the volatility and risk of your overall portfolio. The impact was not as great as you would think given the standard advice to hold a metals position to diversify your portfolio.