Gold has emerged as an essential asset class for investors seeking to diversify their portfolios and protect against market volatility, dollar weakness, and inflation. As a result, gold ETFs have gained significant popularity, with GLD (SPDR Gold Shares) being one of the most well-known options. In this article, we will explore GLD's features, its primary alternatives, and highlight why IAU (iShares Gold Trust) may be a more appealing choice for cost-conscious investors.
Lets recap what this investment vehicle is:
Exchange-Traded Funds (ETFs) offer numerous benefits that make them an attractive investment option for investors. These investment vehicles provide diversification, flexibility, liquidity, and cost-effectiveness, making them an excellent choice for both beginners and experienced investors.
Lets explore two well backed Gold ETFs.
GLD: A Reliable Option for Gold Exposure
GLD is a renowned physically-backed gold ETF that provides investors with exposure to gold bullion stored in secure vaults. This ETF's price moves in lockstep with spot gold prices, making it a transparent and straightforward investment vehicle. Many investors utilise GLD for short-term positions to hedge against equity market volatility, dollar weakness, or inflation. Additionally, it can be part of a long-term investment strategy for those seeking to include gold exposure in their portfolios.
Alternatives to GLD: AGOL, SGOL, and IAU
While GLD remains a popular choice, there are several alternative physically-backed gold ETFs available to investors. Among them, AGOL (Aberdeen Standard Physical Gold Shares), SGOL (Aberdeen Standard Physical Gold ETF), and IAU stand out.
AGOL and SGOL offer investors the option to vault their gold outside of New York and London, with AGOL storing bullion in Singapore and SGOL's vaults located in Switzerland. These options might appeal to investors looking for geographical diversification in the storage of their gold holdings.
However, IAU, in our opinion, represents a superior option for investing in gold through an exchange-traded structure. While the underlying assets are similar and interchangeable across these funds, there are key differences, such as expense ratios and performance.
IAU: A Cost-Effective Alternative
IAU, with its lower expense ratio of 0.25% compared to GLD's 0.40%, provides cost-conscious investors with a compelling advantage. Although the 15 basis point difference may seem relatively small, it can make a significant impact on long-term performance. By choosing IAU, investors can expect a slight boost to their bottom lines.
Moreover, IAU offers high liquidity, similar to GLD, making it easily tradable for investors of all sizes. With a substantial asset under management (AUM), IAU is a widely recognized and trusted gold ETF.
Making the Right Choice
While GLD remains an efficient tool for adding gold to a portfolio, cost-conscious investors should consider the advantages offered by IAU. With a lower expense ratio and comparable liquidity, IAU presents a more attractive option for investors seeking long-term gold exposure.
Alternative ETF's Performance
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If you are new to trading ETFs but are interested in beginning you investment journey we recommend Hargreaves Lansdown or Etoro as reputable brokers.
To invest in ETFs (Exchange-Traded Funds) with Hargreaves Lansdown, you can follow these general steps:
1. Open an Account: If you don't have an account with Hargreaves Lansdown, visit their website and follow the account opening process. You may need to provide personal information and complete any necessary verification steps.
2. Fund Your Account: Once your account is open, you'll need to transfer funds into it. You can do this through various methods such as bank transfer, debit card, or online payment.
3. Research ETFs: Hargreaves Lansdown offers a wide range of ETFs. Spend time researching different ETFs to find ones that align with your investment goals. Consider factors such as the ETF's objective, underlying assets, expense ratio, historical performance, and any associated risks.
4. Place an Order: Once you've decided on the ETF(s) you want to invest in, log in to your Hargreaves Lansdown account and navigate to the trading platform. Enter the required details, such as the ETF symbol or name, quantity of shares, and whether you want to place a market order or a limit order.
5. Review and Confirm: Double-check all the information you've entered, including the order details and any associated fees. Take a moment to review your order before submitting it.
6. Monitor Your Investment: After you've placed your order, you can monitor the progress of your investment through your Hargreaves Lansdown account. Keep track of the performance of your ETFs and make any necessary adjustments to your portfolio over time.
To invest in ETFs (Exchange-Traded Funds) with eToro, you can follow these steps:
1. Open an Account: If you don't have an account with eToro, visit their website and sign up. Provide the necessary information and complete any required verification steps.
2. Fund Your Account: Once your account is open, you'll need to deposit funds into it. eToro supports various funding methods such as bank transfer, credit/debit card, or online payment options. Follow the instructions on the platform to fund your account with the desired amount.
3. Explore ETFs: eToro offers a wide selection of ETFs. Use their search function or browse through the available options to find the ETFs you are interested in. You can filter the ETFs based on different criteria such as performance, sector, or region.
4. Research and Analyse: Before investing, conduct thorough research on the ETFs you are considering. Review their historical performance, expense ratio, assets under management, and any associated risks. eToro provides detailed information about each ETF, including charts, performance data, and other relevant metrics to help you make an informed decision.
5. Place a Trade: Once you have chosen the ETF(s) you want to invest in, navigate to the trading section of the eToro platform. Enter the ETF symbol or name and select the appropriate ETF from the search results. Click on the "Trade" or "Invest" button next to the chosen ETF.
6. Set Order Parameters: Specify the amount you want to invest in the ETF. You can choose to enter a specific investment amount or the number of shares you wish to purchase. Additionally, you can set a stop loss or take profit level to manage your risk.
7. Review and Confirm: Double-check the details of your trade, including the investment amount, order type, and any associated fees. Take a moment to review your order before confirming it.
8. Monitor Your Investment: After placing your trade, you can monitor the performance of your ETF investment in the eToro portfolio section. Keep an eye on the market and track the progress of your ETFs. eToro also provides tools and features to help you analyse your investments and make informed decisions.
Gold ETFs have become increasingly important in the asset allocation process, and GLD has stood as one of the most popular choices. However, when it comes to cost-conscious investors, IAU emerges as a better alternative. With its lower expense ratio and similar liquidity, IAU provides an opportunity to maximize investment returns without sacrificing accessibility or security.
Investors should carefully assess their investment goals, risk tolerance, and cost considerations before choosing a gold ETF. While GLD remains a reputable option, it is essential to explore alternatives like IAU to ensure the best fit for one's portfolio needs.