Investing in Gold Mutual Fund
Arthur P. Mellard -
-
Gold mutual fund investors can still make money. Here's
how...
For centuries gold has been a precious metal for preserving
wealth. In modern days it has been a proven method of
preserving value when the national currency was losing value.
However, in recent times gold mutual funds have been losing its
charm amongst investors; however gold mutual fund investors can
still make money.
Expectations from Gold Mutual Fund Investments
Historically, gold has been a safer method of hedging against
inflation in the long run. In the present economic scenario in
which the economic climate is highly volatile, and inflation is
rising, investing in a gold mutual fund assures some kind of
stability in the long run.
The advantages in investing in a gold mutual fund are: no
hassles of safety; no resale concerns; quality assurance; no
making charges; more tax efficient in absence of wealth tax and
long-term capital gains. In terms of liquidity this is an
excellence tool as even one unit can be bought on the exchange.
Further, in the long run, the annualized rate of return is
higher for such funds as compared to other monetary funds. Gold
in an investor’s portfolio helps in diversifying the total risk
of the portfolio.
Gold mutual funds give high returns to investors when things
are going well. But when a bear market is in force, these funds
can be risky. However, these risks can be minimized by
investors if they keep a track of gold mining stocks being
overvalued or undervalued in relation to gold bullion. Gold
funds usually invest a major part of their assets in shares of
gold mining companies rather than in gold bullion itself.
If the investor can recognize when gold mining company shares
are selling at undervalued rates, the investor can buy gold
funds when they have upside potential and minimum downside
risk. Similarly, investors can avoid any downside damage when
there is a drop in the gold prices by selling their shares when
gold mining stocks reach overvalued levels.
Gold mutual fund investment is a relatively safe way of owning
gold stocks and which allows the investor to diversify among
other stocks. As portfolio management is done by professionals
who know the markets well, the returns are better. Exchange
Traded Funds (ETF) have advantages such as lack of making
charges of gold, impurity risk, resale hassles, absence of
wealth tax and long-term capital gains tax. Experts believe
that investors can invest a small part of their portfolio in
this fund for the purpose of diversification and
hedging.
RESOURCE BOX
Mutual Fund Performance.net
provides detailed information on research, ratings and
articles, all designed to help you invest confidently in mutual
funds.
Source: http://www.mutualfundperformance.net/Gold-Mutual-Fund.html
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