Those who are starting to build a financial plan (and even those with existing ones) normally shy away from adding gold to their portfolio because it’s not one of the popular inclusions. However, a few facts about the precious metal just might change your mind. It’s common knowledge that gold is an effective inflation hedge, and there are many ways to invest in it; The Daily Reckoning provided in an article about gold investment methods. An investor interested in gold options has the following choices: direct ownership, gold exchange-traded funds (ETFs), gold mutual funds, junior gold stocks, and gold futures.
Gold ETFs, in particular, are proving to be a profitable venture. The premise is that owners of gold ETFs are in possession of derivative contracts backed by gold with the purpose of tracking and reflecting gold prices, as substantially stated by About.com. Without actually owning physical gold, ETFs may help lessen the risk of exposure to the downside of the US dollar—if the dollar is weak, gold ETFs will be a good back up plan. Bullion Vault concluded that the convenience offered by gold ETFs make them an excellent investment choice compared to gold futures which are unbacked by gold bullion and are therefore subject to uncertain risks of default.
Recent financial reports by The Telegraph reveal that demand for gold is in a “six-month high” last month. Things are looking up for the precious commodity, and it will be wise to consider the sound advice of experts who say that a standard portfolio should be backed up by at least 5-10% gold presence. With gold ETFs, investors may track the performance of gold index, and may also trade these contracts like shares on the stock exchange. Annual costs for ETFs are also low compared to other stock options.