Today's economic times fluctuate more than the waves in the sea, and many people are looking for something more stable to invest in where they can expect something in return when it comes time to sell. If you are looking for something to invest in to stabilize your portfolio and that will be a safe investment, you may decide on a gold ETF.
Gold commodity exchange traded funds (ETF) are funds where you purchase gold without owning any type of physical gold products that would have to store or preserve on your own. Many different types of gold ETF options exist including gold trust assets, futures and derivative contracts. You must do your research to determine which type of gold ETF will work best in your portfolio and what type of risk you are comfortable with. Knowing whether you are a long term, short term or speculative investor can help you decide which gold investment option is best for you.
Which Gold Investment Strategy is Right for You
The holding period for a Gold ETF can be long term or short term depending on your view of the overall market and your financial goals. You can purchase gold at a flat price with everything bundled into it without paying much at all for commissions or management fees. You will have to decide how much of your portfolio you will invest into gold diversification for your portfolio. Most people choose about 5 percent to 20 percent of their portfolio while there are also some investors who allocate 70 percent or even 100 percent of their portfolio based on their beliefs in the future trends of the stock market.
As with any stock venture, you want to buy when the price is low and sell when the price is high. Gold ETFs have the tendency to fluctuate based on what the dollar is doing in the market. This means that when the dollar goes down, the price of gold goes up and vice versa. Track how gold is doing and buy when it is in a low dip compared to the overall trend line.
As for selling gold, this must be based on the reasons why you purchased the gold ETFs. If you are just looking to hold gold for a short time and sell when the price rises, you will have to pay attention to what gold is doing in the near future and make the best deal. It may take some time, but a lot of financial speculators believe gold will continue to rise and has been appreciating for the last 12 years.
Some people will also purchase gold ETFs to lower their risks when they are involved in foreign investments where the country uses gold as income or for industry investments that involve gold mining stocks. By buying a gold ETF, you are taking control and protecting your downside. Gold is generally seen as a hedge against inflation, uncertainty and instability in the markets.
Gold ETFs gives you many possibilities for great returns whether you are looking at it for the short term to make profits by buying low and selling high, or for the long term to lower your downside risk. If you are involved with markets and investing, you know that there are no guarantees even when it comes to trading in gold ETFs. There may be a time where you experience a loss, but similar to most investments, the returns can be worth the risk. It is important to invest wisely and do you research before executing any trades on any stock markets.
Examples of Two Gold Exchange Traded Funds (ETFs)
IAU – ishares Gold Trust
GLD – SPDR Gold Shares