Almost anyone who has ever given any serious thought to having some of their money invested in the stock market has heard of the traditional gold stocks and bonds. Many of those people are also aware of mutual funds, which are just pools of stocks and/or bonds used for diversification. However, far fewer people are aware of the investment power that can be found in commodities.
Commodities are things such as oil, sugar, gold, etc. which are material substances that have limited quantities and are traded every business day on wall street to determine what their price will be. This means that if oil suddenly becomes more difficult to get to, then the price of oil will rise. If there is a big amount of oil suddenly discovered, then the price of oil will likely drop.
There is also a certain amount of speculation built into the trading prices of all commodities. The best of the best investors will make sure to put some of their money to work in the commodities markets in order to gain a little more security for their portfolio.
One thing that many will invest in is a gold mutual fund. A gold mutual fund works the same way as a traditional mutual fund that invests in stocks. Where the traditional mutual fund will invest in a number (usually a dozen or more) stocks that have some similar qualities, the gold fund will invest in gold and gold stocks.
The gold mutual fund will invest in some of the actual substance of gold and some of the stocks of companies that work in gold. These companies could be gold mining companies or gold processing companies, anything. By spreading your money around the gold markets this way it helps to make sure that your money is secure from total loss.
The main reason that the gold mutual fund is so much more popular to other commodities is that it is considered to be a hedge against inflation. This means that if the price of most common goods begins to go up making the dollar less valuable, then the price of gold tends to rise as well. That means that while the regular stock market may be tanking with the rise of inflation, the gold markets are likely to do well.
It is always good to have balance in your investment portfolio, make sure that you take a look at adding a little gold to your portfolio. It may come in handy the next time the market heads for a large and long dip.
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Tags: gold, gold funds, gold mutual funds, mutual funds