Are you finally ready to begin investing in gold? Maybe you’d rather avoid keeping the physical asset in a safe at home. And you’d rather invest in a gold mutual fund because it seems like the safer and more effective way to capitalize on the increasing rise of the price of gold.
Do you understand this investment vehicle? Do you know why this is such a potent and powerful strategy? I’ll explain a gold mutual fund in greater detail and provide other valuable information on this topic below.
The Truth Behind a Gold Mutual Fund
For the most part, a gold fund is a specific style of mutual fund that allows you to invest in gold reserves either directly or indirectly. Typically speaking, this mutual fund will invest in gold mining stocks, gold distribution stocks, gold producing stocks, and even physical gold as well.
Why are so many people jumping on this investment bandwagon? For starters, gold fund prices are very inexpensive. So, you aren’t going to spend huge amounts of money on management fees or other unnecessary fees.
Next, this is one of the most convenient ways to invest in this incredible precious metal. Otherwise, you’ll have to open a gold IRA account and learn all about precious metals investing, the allowable types of investments, and other IRS rules and regulations.
Although it isn’t mind numbingly difficult to figure out a gold IRA, investing in a gold mutual fund is just an easier way to accomplish the same thing. It’s convenient to buy physical gold and other commodities within this fund without any purchasing difficulties whatsoever.
Gold Mutual Funds: Their Purpose
The reason to own a gold mutual fund is to create additional wealth through another avenue besides traditional opportunities like the stock market, bonds, and treasury bills to name a few of these choices.
In particular, you’ll benefit tremendously by investing in a gold fund if the stock market ever takes a nosedive once again. Because as we have learned time and time again, when the stock market tends to dip in value, the price of gold has a tendency to rise higher. This means your investment will grow tremendously during times of economic pressure on the stock market.
Let’s look at two recent examples.
During the housing market crash in 2008, the value of gold remained relatively the same. But then in 2009 when the economy continued to struggle, the value of gold rose tremendously at this point. At one point during this time, gold was worth almost $2000 an ounce.
It eventually settled in the $1200-$1400 per ounce range and stayed there for a while. But this is still a massive gain when you compared to the $700 an ounce it sold for prior to the housing market and stock market collapse.
Again, the value of gold began to rise precipitously during the coronavirus pandemic when it first hit in 2020 . It didn’t happen immediately just like the last time, but about six months into the pandemic the value of gold began to rise again and reached more than $2000 an ounce this time around.
Instead of dropping all the way down to the $1200-$1400 range, gold prices have stabilized around $1800 an ounce. So once again, this investment has continued to grow over time and it makes investors good money year after year.
Is a Gold Mutual Fund a Good Hedge against Inflation?
Yes, I can say with absolute certainty that opening a gold mutual fund and investing in gold is the smart way to hedge your bets against inflation . I know this because it has been an excellent hedge against inflation for many decades now and it will continue to travel this path in the future.Why? It effectively hedges against inflation because when inflation begins to rise, the value of gold tends to rise in tandem along with inflation. This happens because the US dollar tends to become weak when inflation is strong, and this means gold becomes a much stronger asset to own at the point when inflation is at its highest .
So, if you want the value of your money to remain as strong as humanly possible, you need to begin investing in gold with a healthy amount of your portfolio. This ensures that you do not end up becoming a victim to a weakened US dollar that ultimately cannot buy as many goods and services as it once did before inflation reared its ugly head.
Should I Really Invest in a Gold Mutual Fund?
I believe this is a good investment for anyone looking to achieve a better level of risk and greater portfolio diversification.
Think about it for a second…
When the stock market struggles, many of the other markets tend to struggle right along with it. And when the overall economy struggles, just about every market has to go through a period of struggle at the same time.
Guess what?
Gold prices tend to move in the opposite direction. When the US dollar is in trouble and begins to lose value, the value of gold has a tendency to become much stronger . When the stock market loses value in many cases the price of gold will also begin to rise.
Although the value of gold doesn’t sit outside of the financial markets, it tends to act independently of typical financial trends. This is a good thing for investors looking to achieve greater portfolio diversity because they can invest in physical gold and protect their assets without losing all of their value like they would if they were heavily invested in other investments like treasury bills, stocks, ETFs, and more.
Final Thoughts
We’ve shared many reasons why investing in a gold mutual fund is an excellent idea. It’s a great hedge against inflation. It’s an excellent way to diversify your portfolio. And the value of gold tends to act independently during times of financial crisis, which means it grows in value when other investment struggle. These reasons alone should be more than enough to convince you that it’s time to open a gold mutual fund sooner rather than later.
About Tim Schmidt
Tim Schmidt is an Entrepreneur who has covered retirement investing since 2012. He started this website to share his expertise in using his Self-Directed IRA. Most recently he's been advising individuals to diversify into precious metals ahead of a certain recession. He invested with Goldco.