The value of many investments has dropped due to the poor economy. Investors are watching their hard-earned dollars slip away through no fault of their own. This is the risk they take when investing in the stock market. Some investments are riskier than others and, at this time, the decision to invest in gold is a safe one. There are many options, such as purchasing gold coins or investing in a gold ETF or mutual fund.

The “ETF” in gold ETF stands for exchange traded fund. A gold ETF uses money invested by a group of people and places it into a group of stocks that own and hold gold. The individual is investing in the commodity, so they do not actually own any physical gold. The ETF may be traded at any time and is a good way for investors to add stability to a risky portfolio. An ETF trades in a way similar to regular stock, has a certain price per share, and requires no minimum investment. However, it also differs from a stock in that it does not provide financial statements or earnings reports and only a brokerage firm, not a board of directors, manages the fund.

A gold mutual fund is controlled by a fund manager who generally invests in small gold mining businesses in foreign countries. The fund itself contains many stocks, so its value is subject to daily fluctuation. Investors earn money through dividend and interest payments, capital gains, and increased net asset value.

There are positive and negative aspects to both types of investments. As mentioned above, investors in gold ETFs do not actually own any of the gold on which they are attempting to speculate. If the market crashes, these investors will not hold any tangible assets. The main drawback of gold mutual funds is that investors in this type of fund may not have access to the money at all times. In addition, when the fund is sold, multiple trades must be made at multiple prices, making the objective of reaching a certain amount of profit rather difficult to ensure. Both types of funds are susceptible to mismanagement and fraudulent practices by unscrupulous fund managers.

There are risks inherent in any type of investment, but there are also many rewards. Currently, the decision to buy gold coins or invest in gold stock is both smart and safe. Whether to invest in a gold ETF or a gold mutual fund is subject to the preference of the investor.

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