As of today, gold is one of the most popular assets to invest in.
It is suitable for hedging against political unrest, market uncertainties, and inflation risks. Gold can either be sold as gold bullion directly or used as an EFT investment.
This article will first go over what gold EFTs are, then move on to how to invest in one and then finally describe and explain the best ones to buy this year.
EFTs are exchange-traded funds which do not require a direct purchase.
Therefore, gold EFTs allow traders or investors to get their hands on gold without direct purchasing, storing or reselling.
The interested company buys gold bullions or stocks in gold.
Did you know that gold investment prices rise when stock tumbles occur in a market? This is why gold is considered a safe investment.
Let's look at how you can invest in gold EFTs before looking at the best ones.
Below, we have the typical steps for investing in EFTs:
· Find a gold EFT – this is usually done by simply searching for them on your broker’s website.
· Analyze the EFT – the first thing you should check is whether the returns align with the price moves of gold. Not all price movements have to align, but most of them do. The second aspect to look out for is the expense ratio. The average for most gold EFTs is0.65%. Therefore, it is advisable to pick a low one. Further more, do not buy leveraged gold EFTs as they utilize borrowed money to place bets on future price movements. Gold exchange-traded notes should also not be chosen as an investment.
· Buy the Gold EFT – you do this through an online broker, as mentioned earlier. A pro tip would be to buy them to stay updated with dollar-cost averaging regularly.
Now that we know the basic steps to take when buying a gold EFT, let's move on to which gold EFTs are worth the investment.
Below are some of the best gold EFTs worth investing in.
This is known as the current best performing gold EFT in the market. It is also one of the most affordable EFTs for gold. Granite Shares launched BAR to track the performance of the price of gold bullion minus fund expenses.
BAR allows investors to have physical gold bullions.
Vaults in London hold the funds, and investors can perform audits twice a year to ensure sufficient gold is available.
It currently manages about $923 million worth of assets and has an expense ratio of 0.17%.
Aberdeen Standard Physical Gold Shares EFT (SGOL)
Abrdn’s SGOL is structured similar to BAR in such a way that it also tracks the performance of the price of gold minus fund expenses. SGOL is also very affordable, so we consider it one of our preferred gold EFTs.
It has over $2.5 billion in assets under management, which is not that many but still commendable considering it came into being in 2009. Like BAR, it has an expense ratio of 0.17% as well.
Vaults in both London and Zurich hold the bullion bars and elsewhere in the world.
Investors pick GLD if they want to utilize precious metals cost-effectively.
GLD is, in fact, the most significant physical gold-backed EFT in the world.
Investors can buy gold through their brokerage account or even their retirement account. You do not need to own the gold as the physical bullions suffice. It has more than $67 billion worth of assets and an expense ratio of 0.4%.
Again, the performance is tracked in the same way as the EFTs mentioned above: by excluding fund expenses while monitoring the performance of gold prices.
GLDM costs less than GLD but may be more attractive to investors looking to add gold to their portfolio.
It is an alternative to GLD but holds much less gold than its counterpart.
GLDM has a much lower expense ratio of 0.18%compared to GLD.
IUT is smaller than SPDR funds but is very similar to it.
IUT also gives investors direct contact with the everyday price movements of gold bullion. It has $32 billion in assets with a low annual expense cost of 0.25%.
This allows investors to get access to companies involved in gold exploration.
A unique aspect of GOEX is that, unlike other companies, GOEX sets aside 2% of its portfolio for the information technology sector. This means that 2% of its funds go to companies around the world for diversification purposes.
Global X Gold Explorers has $52 million in assets, with an expense ratio of 0.65%.
GOEX holds their gold mining in many countries, including Canada, Australia, Indonesia, South Africa, Britain and China.
Pro Shares Ultra Gold EFT is the last gold EFT we will discuss.
This invests in futures contracts based on leveraged positions. For explanation, it is necessary to mention UGL. We learnt earlier that leveraged gold positions are not the ideal course of action. This uses debt to increase the returns to the share holders instead of tracking the gold or using an index like other EFTs.
There is a significant risk attached to using an EFT like this, and one should not use a leveraged position for long-term purposes.
Gold EFTs are becoming increasingly popular and for the right reasons as well.
With the ever-expanding market, it is no surprise that numerous gold EFTs are available for you to choose from.
It is ideal to choose a gold EFT with a low expense ratio and a lot of funds in assets.
Also, being established earlier does not necessarily mean good. Therefore, it is best to evaluate a few choices before picking the one you want to invest in.