How Do I Invest in GLD?
If you want to invest in gold without the hassle of purchasing and storing physical bullion, GLD may be your solution. As the world’s largest physically-backed gold exchange traded fund.
GLD shares can be purchased like stocks and represent an ownership stake in the trust’s holding of gold bullion.
What is GLD?
GLD is an exchange traded fund (ETF) designed to track the price of gold bullion. As one of the longest-running gold ETFs available today, this innovative fund gives investors a convenient way to gain exposure to its price without incurring the additional expenses of purchasing and storing physical gold bars themselves.
ETF shares designed to closely replicate the price of gold without fees and expenses are known as exchange-traded funds (ETFs), representing fractional ownership in a trust holding actual gold. Since this ETF does not generate income and must regularly sell portions of its holdings in order to cover ongoing expenses, its share count will decrease over time.
This ETF charges an annual fee of 0.40%, which is quite reasonable in its category. However, investors should compare it against some newer alternatives that provide similar exposure to gold with lower expense ratios before making their purchase decision. Therefore, before purchasing this ETF it is wise for investors to carefully consider their goals and the other similar funds before making a final choice.
How does GLD work?
GLD is an attractive way for investors to gain exposure to gold without owning physical bullion. Trading like a stock and featuring low fees makes GLD an appealing asset addition for portfolio diversification purposes. GLD also boasts tax benefits: long-term gains are subject to tax at 28% rather than the 15% or 20% capital gains tax rate that applies for most investments.
World Gold Trust Services, LLC oversees GLD as its sponsor and custodian. Physical gold stored within HSBC Bank of New York segregates it from that belonging to other clients. Shares can be created or redeemed in blocks of 100,000 (known as baskets) through authorized participants – broker-dealers that have entered into agreements with GLD’s trustee and sponsor and are approved to deposit or redeem gold in exchange for GLD shares.
Investors considering GLD as an option should carefully consider their investment horizon. Do they intend to hold it long term for inflation protection or profit from short-term price movements? Depending on how these questions are answered can determine which one would better meet individual investment strategies; whether GLD or IAU would make better candidates. In addition, prospective investors should take brokerage commission and ETF expense charges into consideration which could eat into returns.
What are the risks of investing in GLD?
Gold ETFs like GLD offer investors an extremely cost-efficient means of diversifying into the metal. At less than $180 per share (or one/10th of an ounce), these funds offer far cheaper access than purchasing physical bullion which typically costs much more. There are some risks, though; unlike physical bullion these funds don’t redeemable back into its physical form and their price volatility may cause worry; selling options on ETFs could help to mitigate some risks; it would also be wise to consider funds such as Sprott’s collection of funds or Perth Mint Gold Fund that stores physical allocated and vaulted bullion such as Sprott’s collection of funds or Perth Mint Gold Fund as these may offer greater security when investing into precious metal.
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