As a stock trader, would you characterize yourself as aggressive? Are you the kind of person who obsesses over stock quotes every day? Do you like to buy and sell stocks on a short investment horizon? Sure, the risks may be higher but so can be the profits. That is, when you’re right.
Then maybe physical gold isn’t right for you. Maybe a Gold ETF is what you’re looking for. Of course, there’s the matter of the higher transaction fees. And since paper gold holds no inherent value, unlike physical gold, it also offers no real protection against stock market volatility. Then there’s the factor of accountability––since there’s no auditing of their custodial holdings and their actual gold figures are kept a secret, you have to have faith in the integrity of the company you’re investing in. Also unlike the physical metal, ETFs have high reporting requirements.
Under an ETF, a trust owns the gold and you are a beneficiary of a debt owned by the trust which is backed by gold. Most ETFs do not allow investors to withdraw their share of gold. Instead, they use derivative contracts to hold the physical gold. You are buying a share in a particular store of gold that you will never see.
Aside from having no rights of redemption of the gold you “own,” the gold in the Trust isn’t even required to be insured. Therefore the Trust is not liable for loss, damage, theft, or fraud.
ETFs also don’t offer the liquidity of physical gold. In fact, some ETFs are illiquid and this impacts their buying and selling flexibility.
In addition to annual storage fees, ETFs usually charge a percentage-based commission according to the stockbroker you choose. The annual expenses of the funds––such as insurance, gold storage, and fund management––are charged by selling a small amount of the gold represented by each share. Because of this, the amount of gold backing each share gradually diminishes over time.
Mining stocks share many of the same disadvantages. As a paper stock it also holds no inherent value. The mines are susceptible to exploration risks and geological/meteorological challenges. Like any corporation, they’re also prone to leadership or human resources issues.
To make the most of the wealth protection and growth potential of gold, it’s always best to make sure your assets are tangible. It’s as the saying goes: If you don’t hold it, you don’t own it.
If you have your ETF in an IRA, transferring is relatively simple and painless process. Keep in mind that the conversion from ETF to physical gold is a non-taxable event.
The Value of Gold
In addition to having a means to greatly reduce your overall portfolio volatility, with physical gold gives you a hedge against an economic downturn while also adding a tremendous opportunity for gain.
Before you invest any of your money, make sure to do your homework and get the best information available. You can begin by downloading a FREE mini-course that will help answer many of your questions about gold investing and coins, which coins are the best investment, and investing gold in an IRA.
In our gold guide you’ll find answers to questions like:
Full of answers to these and other questions as well as many important money saving investment tips, this guide has helped teach many of our clients to invest like experts. If you’d like to save precious time and possibly thousands of dollars, you need to read this today!
An investment portfolio that isn’t diversified could be leaving your retirement in danger. The clock on your money is ticking. Don’t wait to protect your assets.