Gold mutual funds are just one kind of mutual fund where you can invest your money, pooling with other investors to buy shares in several different companies. Gold mutual funds are much like sector mutual funds. Sector mutual funds invest your money in several companies that are all in the same industry, such as utilities, or pharmaceuticals. Gold mutual funds are those that invest your money in several different gold mining companies. They can be highly successful if the gold market does well.
Just like other mutual funds, gold mutual funds pool the money of investors and buy shares in a range of companies. The advantage to mutual fund investing is that it allows you to easily diversify your portfolio without having to spend a lot of time researching and picking particular stocks or companies. Mutual funds are also helpful to the investor because they receive the benefit of having a professional managing the fund; which should be help ensure that the money is invested wisely. They are also good for the investor who doesn’t have a large amount to invest; you can often get into a mutual fund for a fairly small investment.
Gold mutual funds have all the benefits of every other type of mutual fund, but they are dependent upon how well the gold market is doing, as well as how each individual gold company within the fund is doing. Just like sector funds, if the entire industry is doing well, everyone benefits, but if the industry does poorly, everyone loses. Investing in gold through mutual funds does protect the investor in case one particular gold mining company does poorly even in a good gold market, because the investor’s money is spread across several gold mining companies.
Just like other mutual funds, you can find gold mutual funds that are high risk and those that are low risk; though in the last few years gold on the whole has been a somewhat low risk, because gold has performed consistently well for the last several years. You can also choose gold mutual funds that are designed to be growth funds and those that are designed to be income funds. Most gold mutual funds paid their investors dividends over the last few years, even in gold growth funds, which often reinvest their earnings for future growth rather than paying dividends.
As good as gold mutual funds have performed over the last few years, it’s important to understand that the gold market it always highly speculative. No financial advisor I can think of would recommend putting the majority of your money in gold, even in the most bullish market, where gold performs at its best. However, if you are looking for a way to diversify your portfolio, adding gold to the mix might be a very good idea. Gold mutual funds have performed well over the last few years, and can likely be expected to do well going forward. It’s definitely worth your time to talk to your financial advisor about adding gold mutual funds to your portfolio.