Analyzing Gold ETF Investments

Analyzing a gold ETF investment is no different than analyzing any other investment in an exchange traded fund. ETFs that are based on gold indices and prices can be a good way to provide diversity to your portfolio. These ETFs can add commodities to your overall portfolio and help you diversify. As with all investment strategies, you should consider consulting an investment professional before you invest. Whether you decide to do it yourself, or hire someone you should research credible sources that can provide you with objective investment information.

What Are Exchange Traded Funds or ETFs?

Exchange traded funds or ETFs track the performance of the index underlying its main asset. It can be based on a commodity such as gold or oil and also on bonds and stocks. ETFs seek to match the returns provided by the asset’s index not outperform or beat that performance. The advantage of an ETF for an investor is that it requires a smaller capital outlay than actually making an investment in the underlying position. This allows almost every investor the chance to make an investment in gold without having to actually purchase the gold bars.

Analyzing Gold ETF Investment Information

To analyze gold ETF investments it is best to use the information from such sources as the NASDAQ. The NASDAQ, which stands for the National Association of Securities Dealers Automation Quotation system is the best source of information on ETFs and the best place to find current and up-to-date trading information. The NASDAQ is also known as the over the counter market and ETFs, which are an investment type that is similar to mutual funds (although not exactly), are commonly traded over the counter.

Basing Your Investment Decision in a Gold ETF

When looking at investment returns for gold ETFs you should base your investment decision not as much on the past performance of the fund but on other factors as the management team and how closely the fund’s returns mirror the performance of the underlying gold asset. ETFs seek to be the asset, not outperform the asset. That would mean that the gold ETF is a passively managed fund that should not require much intervention on part of the fund’s management team to mirror the same performance result.

Analyzing ETF Costs

Another factor that has to be analyzed relative to ETFs is the cost of the fund in terms of fees and charges. Management fees, commission charges and other expenses will erode your performance, as well as taxes. The ETF should be a low cost one that does not charge much in terms of management fees nor should it tack on any additional feed for this passive investment style. A fund whose overall expense ratio is higher than 2 to 5 percent of the fund’s assets should be highly suspect and avoided in favor of a lower cost fund.

blog comments powered by Disqus