Gold is a mineral that has been invested in for thousands of years. This shiny lump of star debris has been fought over and caused the rise and fall and numerous empires. All that, and it's really, really pretty.
If you're looking to invest in gold, a few things you might consider are Gold Stocks, Gold ETF's, Physical Gold Bullion, and even Gold IRA's from Goldco. If you want to know how to sell your gold, we have information on that too - however In this article, we examine the differences between a Gold ETF vs Physical Gold.
Today, gold is banked upon for its ability to do nothing but increase in value. This makes it one of the most sought-after forms of investment with newbies and seasoned investors alike.
Of the many ways we have created to use gold for our financial benefit, two methods exist as the most popular. One is in the form of Gold Exchange-traded funds, and the other entails owning gold the good ol' fashion way.
But which is better?
By the end of this article you're going to have a very solid understanding of:
- What a Gold ETF is
- What it actually means to own PHYSICAL Gold
- The Difference Between The Two & The Pros & Cons of Each
We'll try to answer all this and more in the article ahead:
What are Gold ETFs?
In simple terms, a Gold Exchange-Traded Fund is a mutual fund that allows a group of people to own gold bullion. These have a purity of 99.5% and tend to track the gold's domestic prices. These serve as an alternative to actually owning physical gold and all the complications that come with that.
It is also cost-effective. Mutual funds operate by pooling in the money of investors together and investing it in things. The profits of which will be divided equally among the participants. By buying gold together with other investments, you don't have to shell out too much capital. It means you own the gold together but the firm takes care of the actual storing and securing of the gold.
They have the benefit of gold's value without the responsibility of having to care for it physically.
One unit of a Gold Exchange-traded fund is equivalent to one gram of gold. They are offered in most mutual fund brokerages and some mutual funds even real exclusively in gold. Gold is exchanged everywhere in the world, this also means you could buy gold ETFs anywhere in the world and benefit from their domestic gold prices therein.
Pros & Cons of A Gold ETF
What about owning Physical Gold?
Who doesn't want to own actual gold? Something about having the noble metal physically present in your life conjures up images of cartoon gold vaults and treasure stores. Though less grand, there are some benefits to owning physical gold that other forms of gold investments just can't replicate.
Owning actual gold has the benefit of being readily available for liquidation when the need for cash arises. Most cities have places where gold can be traced quite easily.
Gold is also a great backup in times when normal money is rendered useless. Yes, this is a highly paranoid and unlikely scenario, but there is something to be said about being ready for anything. Say that the economy collapses or a natural disaster renders normal forms of payment unavailable. In cases like this, gold and other precious metals and minerals will become the new standard of exchange.
That being said, owning real gold means you'll also have to be concerned with securing it. This could either be in the form of getting home safe or a safety deposit box. There is also a need for getting an insurance policy on the gold. Some could do without it but theft or loss of property is a real fact of life that needs to be properly accounted for.
Pros & Cons of owning Physical Gold Bullion
What Sets Them Apart?
The first thing that sets them apart, is their prices. Buying gold physically costs more than purchasing Gold ETFs. This is because physical gold comes in 10-gram denominations which means you need to have at least enough money for 10 grams. Gold ETFs can be purchased for as low as one unit which is equivalent to one gram.
Even with the need to buy gold at certain amounts, it is not completely guaranteed that you are purchasing the purest gold possible. Gold ETFs on the other hand ensure that the unit you are buying is for 99.5% pure gold. Along with that, the prices of Gold ETFs are strictly uniform whereas that of physical gold fluctuates.
Owning physical gold can provide the owner a lot of liberties with regards to managing finances. The value of your investment is much more easily calculated because you simply need to multiply the grams to the current market price. In times when you need cash, you can simply convert the grams needed to cash and allow the rest to continue increasing in value.
Both come with their set of difficulties tax-wise but, generally, owning gold physically will end up costing you more in taxes. Plus, it requires you to make calculations whereas ETFs just deduct the tax automatically. If you are one of those people who despises lengthy calculations and the tedious running down of taxes, consider ETFs as the mode of investment.
In the end, they both can serve as viable sources of passive income and offer a great hedge against inflation and any depreciation that other investments might experience.
Gold is a good investment no matter what form it takes. Its rarity ensures that it will only get more valuable in the decades to come. If you're an investor that wants to be ahead of his or her investments and have a great emergency fund at the same time. Gold is the way to go.
Both Gold ETFs and owning Physical Gold come with their own set of pros and cons. It's for you to decide which pros you'd benefit from and cons you'd rather deal with. ETFs are easier to hand but physical gold allows for more mobility. No matter what you choose though, know that you'll be owning and benefiting from Gold -- Gold in all its ancient glory.