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Typically, gold prices start rising up when the stock markets fall. The commodity isar a premium as the production of Gold is less than the total demand for it world wide. The question that new investors ask is "How to invest and trade in Gold?"
The answer is gold exchange traded funds (ETFs) instead of purchasing gold directly. Gold ETFs have returned 27.9 per cent in the last one year vis-a-vis equity diversified funds that have given returns of 21.4 per cent. They performed much better in the last quarter as well, providing returns of 13 per cent as against -28.3 per cent in case of equity diversified funds.
ETFs are traded on the stock exchanges in a similar manner as shares. The new fund offerings (NFOs) have an entry load of 1.5-2.5 per cent and incur expenses of 1 per cent a year on management fees, custody and insurance.
Gold should ideally form only 10 per cent of one’s portfolio. Only the conservative investor should go for more than 20 per cent gold in overall asset allocation. Another way to benefit from the gold boom is by investing in mutual funds that track gold mining companies and collectibles.
The idea is not to buy gold in the physical form and store it. Physical possession of gold is not easy to trade because banks don’t buy it and your local jeweler is not easy to haggle with. The answer for investors lies in Gold exchange traded funds (ETFs)
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