Investing In Gold ETFS And Gold Structured Products: What Does It Mean?
June 9, 2021
In times of volatility and panic in the stock markets, gold remains one of the most attractive defensive assets. It is durable, in demand and allows you to preserve capital in a crisis.
In this article, we will tell you what are the ways to invest in gold and what the value of this precious metal depends on.
Investment in gold funds
There are two types of funds operating in our market – investment in gold mutual funds and ETF/exchange-traded funds, which follow one or another index and are passive investment funds, without active management and goals to outplay the market.
Exchange-traded mutual funds are bought into a brokerage account, ordinary mutual funds can be bought at the office of the management company or in the agent company of this management company.
It would seem that with this method of investing, the investor’s task is to choose a suitable fund, enter it and sleep peacefully. But not everything is so simple. What pitfalls to pay attention to?
When entering a mutual fund, study in advance its strategy for investing in precious metals, and also try to understand how this fund works. Quite often, inside a classic mutual fund, there is a foreign ETF fund that follows the dynamics of the gold price. At the same time, the management company charges a management fee.
Also, the names of some mutual funds indicate that these are gold investment funds, but their portfolio includes ETFs, stocks and bonds.
The investor should study in detail what exactly the fund’s portfolio is formed from in order to understand whether issuers are associated with the precious metals market. Is it cheaper and easier to invest directly in ETFs?
Personally, experts prefer ETF/exchange-traded mutual funds in gold, rather than classic mutual funds, because ETFs are cheaper in terms of fees, more liquid and often have a lower threshold for entry.
Fortunately, there are funds on the market that are available even to unqualified investors, with a low entry threshold.
Investing in gold through structured products
It happens like this: you expect the price of gold to rise, count on the development of gold mining and want to earn more than on bonds, which means that you are inclined to buy shares of some gold mining giant, futures or options on gold, or to enter the gold fund. But at the same time, you are afraid to lose your investment. What to do?
You can use structured products for gold or shares of gold mining companies, that is, ready-made investment strategies.
Structured products are tied to the price of the underlying asset, which can be stocks or bonds of gold mining companies, funds for stocks and bonds of similar companies, or the metal itself.
Gold investment schemes in India can have strategies for growth, fall, sideways trend of the underlying asset, etc., that is, an investor can make money not only when the price of gold rises. However, in order for this strategy to work, it is assumed by default that you will invest in the best gold investment plan in India until the end of the term (usually from 1 month to several years), so if you decide to sell this instrument early, y