Gold ETF is getting popular because investing in precious metals such as gold is getting quite popular due to the high gold prices. But investing in gold requires special attention. What gold ETF funds do, is provide a method of investing in gold without having to physically have a pile of gold. You don’t have to worry about purchasing gold bars, putting them in a safe deposit box and safely selling them.
Gold ETF sounds great but what does ETF mean? ETF stands for Exchange Traded Fund. It is traded on the major stock exchanges. All the major exchanges have ETFs but the gold ETF funds are primarily traded on the AMEX. When you buy an ETF you are investing in a group of companies and not a single corporation. The gold ETF fund will buy a large amount of physical gold bars and keep them in storage. Then they’ll issues shares which will increase in value as the price of gold increases. The shares will increase the exact same percentage that gold bullion does.
What makes gold ETF funds so attractive is that you can invest in gold without having a gold bar lying around, you can do it during stock exchange hours, you can use your online brokerage account and you don’t have to buy a large amount to start investing. There is a minimum investment with gold ETF funds, but you can buy portions of an ounce and not a full ounce which makes it much more affordable. More popular ways to buy gold are the SPDR Gold Trust GLD, Market Vectors Gold Miners ETF GDX, and ProShares Ultra Gold UGL.
GLD was the first gold ETF and is still the most popular. What they do is buy 400 ounce gold bars from London Good Delivery bars and issues shares based on the price of an ounce of gold. But they issue the shares at one tenth the price.
UGL is aggressive and is known as double gold ETF as it is designed to double the investment return. So if gold bullion increases by 1%, these shares would increase by 2%
GDX tries to mirror the NYSE Arca Gold Miners Index as close as possible.
If you go into gold ETF your portfolio will be full of a variety of gold mining companies.
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want to know about gold ETF in details.