Gold Investment Funds vs. Gold Stocks: Pros and Cons

When it comes to the best gold investment possible in your specific situation, you will need to look at the pros and cons of gold investment funds versus those of gold stocks, to evaluate which is a better choice for your investment goals.

When you are investing in gold there may be many reasons you made this choice. However, the two main reasons investors choose precious metals market is because they want to keep track of the spot price of metals or invest in particular gold mining companies. Understanding the difference is the key to navigating in the avalanche of precious metals investing choices.

Gold Investment Funds

When you choose gold mutual funds, you can get a diverse investment portfolio with many holdings in a single transaction. If you tried buying individual stocks then it would take you an enormous amount of both time and money, and require many transactions to build the same portfolio doing it one piece at a time. Depending which funds you choose, they will either track the price of precious metals or own shares of a number of mining companies. Most funds come with a load, which is basically an annual fee that you pay the management of a fund, a professional who makes the trading decisions for all the investors. The fund is as good as its manager, so definitely learn some basics of fund analysis. If you are an investor who is comfortable with a manager making your decisions than these may be ideal. If you are an investor who prefers to control every aspect of the investments you have, including when to buy and sell each holding, then stocks may be a better choice over gold investment funds in this factor.Some of the pros to speak of is diversification and risk spread out. Major con is fees associated with the funds, however, you can pick no load funds that some analysts believe are a way to go.

Gold Shares

These are shares of individual companies involved in prospecting, developing or mining for a range of precious metals. By buying these shares, you are investing your money in the gold mining business not the actual spot price of precious metals. Your earning will mainly depend on how well the company does in the short and long run. Such stocks are considered some of the most volatile in the market. If you understand all the ins and outs of the stock market and have strong analytic skills, then you might be better off with stocks. Pros of making your own decisions sometimes outweighs the cons of high volatility for some investors.

Gold investment funds offer more convenience, and you do not require a large initial investment normally. With one purchase you will get a balanced portfolio, but that does not mean that a gold bullion ETF or other fund choice is always ideal. Get information about all gold investment companies before you make a decision. In some circumstances it may be better to choose stocks, depending on your investment goals, strategies, and the acceptable risk level you have set. Gold investment funds offer instant diversity, but you may end up owning some holdings that you would not have personally chosen.