In uncertain economic times, many people are looking to diversify their portfolios. Purchasing physical gold assets and gold exchange-traded funds are two ways you can do so. These precious metal investment options differ in a few key ways, which may make one a better fit for your overall investment plan.
Exchange-traded funds are a type of financial derivative; investors hold shares of the investment pool, which are traded on a national stock exchange at market prices that can vary throughout the day due to factors such as demand.
In the past 15 years, gold ETFs, which track the performance of physical gold, have become increasingly popular, according to Gainsville Coins.
Interest in gold as an investment has risen since the introduction of gold ETFs in 2006.
ETFs can allow you to enter the gold market quickly because they’re generally available and don’t require a large investment. They can serve as a simple way to diversify your portfolio, potentially counterbalancing some of the risk from other investments without requiring you to hand-select different types of assets. You’ll get a mix of multiple types, such as stocks and bonds, when you purchase a gold ETF.
When gold prices shift, because an ETF encompasses multiple assets, you may experience less of an impact than if you’d invested in a gold stock.
It’s important to note, however, that when you invest in a gold ETF, you’re investing in a fund backed by gold-related entities, such as mining stocks — not purchasing actual gold. You won’t receive physical precious metals when you choose to exit the investment, and your investment may be subject to any issues the underlying asset experiences, such as a gold mining company defaulting.
Gainsville Coins on Gold-Backed IRA Benefits
Some physical gold items, such as gold coins and gold bars, can be purchased for inclusion in a self-directed individual retirement account.
While both physical precious metal assets and gold ETFs can provide considerable liquidity, you own the assets that are held in a gold-backed IRA. They’re a tangible investment; you can pass coins, bars, and rounds on to future generations, hold on to them indefinitely, or decide to sell them and receive cash.
Gold IRAs are a safe way to preserve wealth over the long run.
While precious metal assets need to meet specific qualifications to be eligible for inclusion in an IRA, per Internal Revenue Service requirements — gold coins, for instance, must have a fineness of at least 0.995 — you’ll generally have more flexibility to allocate the associated assets in a gold-backed IRA than with a gold ETF.
The IRS also requires the precious metals in gold-backed IRAs to be stored in an approved depository.
The specific method can differ. Coins are sometimes placed with other precious metals with the same weight and purity. Certain providers offer segregated storage — the type Gainsville Coins utilizes in its Gainsville Coins Storage facility — which guarantees your assets will be housed separately from other customers’ items.
A fee is typically involved for storage, which can be another consideration to take into account when deciding between an ETF and a physical gold investment.
Storing your assets remotely, however, eliminates the risk of them being stolen from your home and can often provide additional protection. Storage in Gainsville Coins’ vault, for instance, includes comprehensive insurance that will cover the full replacement value of the items.
Read more about investing in gold and the gold market from the expert authors at Gainesville Coins
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Read More: How Gold ETFs and Physical Precious Metal Investments Differ