Investing in Gold ETF

Investing in actual or physical gold has its challenges. Storage problems, security, liquidation and insurance are only some of the problems of the owner of actual gold have to consider. Although the price of gold continues to increase, the maintenance cost of actually owning gold will make owning it not even worth it. The problem is even highlighted if the owner has an actual gold bar. Liquidation is very difficult as buyers of actual gold bars are rare.

If you’re interested in investing on gold, consider gold ETF (electronically traded fund). It’s a type of investment that will let you own a share of gold stored in a highly secured holding facility. Your shares reflect the actual price of gold.

You don’t actually own gold right now but you virtually own gold because you purchased a share of the gold placed in a specified facility. You can also sell your share of gold and reap profits if the price of gold would increase. The actual physical gold is never seen but the funds are traded back and forth. The physical gold is never moved but ownership changes every time someone buys or sells their shares of gold.

Advantages of Gold ETF

• No additional payments

You only pay what is being sold. There may be brokers along the way but are already paid through the price of the shares they sell. Projecting payment is very easy in Gold ETF because mark-ups are rare and frowned upon by Gold ETF investors and even brokers.

• Flexibility

Buying physical gold in high volume will require you to have a large storage facility that will not only cater to the conditions of gold but also its security. Purchasing a small amount of gold also has its challenges since the mark-up value of actual gold would require the owner to wait for more than 10 years before a profit is made on the actual selling price of gold.

All of these problems are diminished with gold ETF. You can buy as much or as little gold as you want without any concerns for storage and disposal. You still own gold but they are only done in paper and/or online.

• Online Availability

Physical gold bullions could still be sold online but it would still require physical contact between the buyer and the seller. Gold ETF on the other hand could be done online, anytime. There are hundreds of websites that are now host for buying and selling gold ETF.

Disadvantages of Gold ETF

• Taxes

There are no tax cuts in owning gold even if you just virtually own them. Although the price of gold ETF could be calculated, part of that calculation is actually in different taxes. Aside from federal taxes, state taxes could be also applied during the transaction of gold ETF.

• No Guarantee for Quality

Most, if not all, investors in gold ETF have never visited the facility that holds them. This is of course, for securities sake. But you can never know what type of gold you actually own.

• Management Costs

If there are any hidden charges in owning gold ETF, it’s the management costs. You should be aware that handling a vast amount of gold will take people and facility to secure them. As owner of some of that gold, you should contribute in making them safe in the same facility. These are usually billed yearly.

• Cannot be Converted to Actual Gold

Your gold ETF will stay that way, forever. You can buy or sell gold ETF but you can never ask that your gold ETF to be converted to actual gold where you could physically own and trade them.