Gold Mutual Funds Are A Top Mutual Fund

Posted on Feb 28, 2011 in Gold Mutual Funds | 0 comments

For years we have heard that gold is a hedge against uncertainty in the markets. It’s almost universally true that when the markets are down and the dollar is falling, gold will hold it’s value and even tends to go up in value. During these uncertain economic times having gold as part of your overall portfolio is a smart thing to do. And for those of you who don’t want to deal with buying gold bricks, gold mutual funds can offer you the same safeguards.

Gold mutual funds are simply another, safer and more convenient way to invest in gold. You don’t haver to actually purchase the gold or hold it. Instead you pay a mutual fund to buy the gold on your behalf and you are the owner of however many units of gold you’ve purchased. The actual gold will be held at a secure location, usually a bank.

Since your purchase is backed up by a tangible product it is very safe. If you choose to sell off your shares of gold you will get that days prevailing rate.

Of course, not all mutual funds operate this way. Some don’t actually own any gold at all. They invest instead in such things as gold mining companies rather than the actual gold bricks. For that reason it’s important to understand that the price movements of the mutual fund may actually not correlate to what is going on with the actual price of gold.

For example, let’s say the mutual fund you are in has invested heavily in a gold mining operation in a third world country. If something happens in that region, such as political unrest or a natural disaster, and the mine has to be shut down for a period of time, the price movement will be downward even though the actual price of gold is going up.

Remember, too, that the closer the mutual fund stays to the actual gold, actual mining companies, the more the price movement will mirror the actual price of gold.

If the mutual funds invests in companies that simply make their product out of gold, for example, and are further away from the actual gold itself, the more variance between the price movements in the mutual fund and the actual price of gold.

There are many gold mutual funds you can invest in and it’s important that you locate the top mutual fund before you invest. That can be a little bit misleading, ultimately whatever the “top” fund is will be whatever funds is most closely aligned with your goals.

The whole point is that no matter what you are investing in, you need to take the time to educate yourself on the ins and outs of that particular investment. You should never just turn over your money and hope for the best.

When investing in gold mutual funds it’s important to be willing to invest the time to educate yourself. The top mutual fund for you may not be the same as the top mutual fund for your neighbor.

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