Wanting to invest in gold is a common thing for many people. Gold is mystical, it is incredibly heavy, very expensive and coveted. You can invest in gold by buying physical gold and storing it but then you run into the storing problems and keeping it safe. A great way to invest in gold without those problems are with a gold ETF. ETF is short for exchange traded fund. It can be traded on an exchange like a stock and anyone can invest in it with any online brokerage account. An ETF tracks indexes like the S&P 500 or industries. In this case it’s a commodity of precious metal gold. You can buy shares in the fund and a fund manager will invest on your behalf. When the value of gold increases, so does the value of your fund shares. It is a very liquid investment and easy to cash out at any time.

One problem with gold ETFs is that you don’t know what happens to your gold, unlike investing in physical gold bullion. You can’t grab your share of gold and look at it, as it’s all on paper. The fund owns your gold and if you read the ETF prospectus you will probably find that it would say the ETF provides a cost effective way to make an investment similar to investing in gold. What does that mean similar to investing in gold? Aren’t you investing in gold with a gold ETF? This means that not all your ETF shares are backed by real gold. They are backed by cash and paper that promises to give the fund gold but not each share is backed by physical gold.

If the fund managers play around such as with futures and there is a big mistake and the fund loses a large part of it’s assets, the value of your shares will drop even if the price of gold is still going up. So you are taking a risk even though this seems like a great thing.

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