How Do I Invest in GLD?
GLD shares are similar to stocks, yet differ significantly from holding physical gold bullion. Instead, their gold holdings are held in an allocated account at HSBC Bank of New York and throughout a business day it may be moved from allocated and unallocated accounts as needed.
Investors use GLD to gain exposure to the price of gold, an investment considered an effective hedge against economic decline and inflation. There are other methods available for investing in this precious commodity such as buying it itself or investing in gold-mining stocks.
It’s a fund
GLD provides an alternative investment option if you don’t wish to own physical bullion: an exchange-traded fund which tracks gold prices. Trades just like stocks; additionally, has a lower expense ratio. Plus you could save even more by purchasing it via an investment app!
Each share of GLD represents an undivided fractional ownership interest in its trust, which holds physical bullion and some cash holdings. This structure removes tracking error risk common to other commodity ETFs; its expense ratio of 0.4% is also significantly lower than iShares Gold Trust’s fee of 0.25%.
However, this type of investment still poses counterparty risk. Since gold is stored across various locations and any one could fail at any given time and lead to losses; additionally, GLD’s trustee and custodian have only limited insurance policies available to cover theft risks.
It’s a product
GLD is an exchange-traded gold fund (ETF), tracking the price of bullion bullion on the over-the-counter market. Each share represents a fractional ownership stake backed by physical gold bullion and cash; however, retail GLD shareholders do not own any physical bullion and instead act only as creditors of its trust; should there be any mismanagement issues they could end up losing their shares in lengthy court proceedings.
Gold has long been popular with investors for various reasons. Many view it as an inflation hedge or as an alternative monetary asset; and diversifying portfolios. GLD provides low expense ratio and easier trading than futures contracts which can be more volatile.
As well as offering access to spot gold prices, derivatives provide a convenient means of diversifying exposure but should not replace an investment allocation in gold bullion bullion investments and provide no safe haven protection as they are unbacked or guaranteed by any central bank.
It’s a security
GLD was among the first ETFs to track gold prices. Its shares are traded on the New York Stock Exchange like stocks and can be bought or sold throughout the day, each share representing one-tenth of an ounce of bullion. GLD boasts an extremely low expense ratio of 0.4% when compared with its competitor iShares Gold Trust which has an expense ratio of 0.25%.
GLD shares trade at market price and may exceed or fall below net asset value (NAV), calculated based on the LBMA PM Gold Price. As some gold is sold off by the Fund to pay expenses, each share may become less representative over time.
Before investing, investors should carefully assess the investment objectives, risks, charges and expenses of SPDR Gold Trust as outlined in its prospectus. State Street Corporation does not make any representations or warranties as to its suitability for investment or the potential advisability of investing in SPDR Gold Trust.
It’s a commodity
There are various methods of investing in gold, such as purchasing physical bullion, purchasing shares of gold-mining companies or investing in exchange-traded funds (ETFs). SPDR Gold Shares, one such ETF that tracks physical bullion prices closely. Other funds track gold mining companies or futures contracts.
ETFs offer an efficient and cost-effective way of investing in metals like gold. But they come with their own set of fees; SPDR Gold Shares charges an annual management fee equivalent to 0.40% of total assets value; you could reduce these expenses further by using an app with low management fees in order to purchase GLD.
GLD can provide investors looking to diversify their portfolio with an opportunity to do just that, yet should be aware that profits from long-term GLD investments will be taxed at a higher rate due to being considered collectible by the IRS.
Categorised in: Blog