Many financial experts recommend investing in gold stocks. Having a well-diversified portfolio is a way to manage and reduce risk. Many experts believe that all balanced portfolios should contain gold. In difficult economic times, investing in gold becomes a more attractive investment. During these times, there are often difficulties in the currency markets. Lack of confidence in currencies makes gold a more attractive investment. The inclusion of gold in a portfolio is a critical element according to many financial experts.

Difficulties of Physical Gold Trading

For most individuals, holding the actual gold as an investment is not practical. Most average investors cannot determine the content and quality of gold. Finding a secure place for storage and insurance can be a problem for some. Buying and selling is more of a problem. A legitimate buyer or seller may be difficult to identify when you are ready to make a transaction. Therefore, the three most practical ways for most people to invest are in exchange-traded funds, mutual funds or stocks. Investing in gold through the stock market solves many of the problems noted earlier. Stocks are easily traded. The market determines the price of stocks on any given day. Generally, the investment company holds the shares of the investment. Few people actually take possession of stock certificates. Therefore, investing in gold stocks is the easiest and most practical way for most individuals to invest in gold.

Exchange-Traded Funds

Exchange-traded funds issue shares that mimic an index. There are a variety of these types of funds. Some mirror the overall stock market, while other funds mimic certain types of stocks or sectors of the market. For example, there are technology and S&P 500 exchange-traded funds. Gold exchange-traded funds were created to give investors an opportunity to invest in gold. These exchange-traded funds mimic the price of gold. They track an index representing the price of gold. Purchasing shares in one of these funds is designed to provide an easy way to invest in gold. An investment in these funds is designed to give an investor the same effect as buying gold bullion.

Mutual Funds

There are various mutual funds that invest in precious metals. Some of these funds are specifically designed to provide shareholders with an investment in gold. A mutual fund is designed to provide diversification. Therefore, only a portion of your investment in one of these funds may be in gold.  However, the advantage of investing in this way is that you may lessen your volatility. Mutual funds provide another excellent mechanism for individual investors to diversify into gold stocks.


Some publicly traded companies specialize in providing investors with a stake in the gold market. These are actually stocks in mining companies. The investor is, therefore, investing in a company involved in the gold business. Therefore, these stocks represent an indirect investment in gold. An investment in these stocks will be more volatile than an investment in either exchange-traded funds or mutual funds. However, an investor can participate in the ups and downs of the gold market by purchasing these stocks.

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