As an investor looking to add gold to their portfolio, the options can seem overwhelming. There are countless gold mutual funds available, each with its own unique approach and track record. So how do you choose the right one?
The key is to focus on performance. By selecting a gold mutual fund that has a history of solid returns, you can maximize your profit potential while also minimizing risk. In this article, we’ll highlight some of the top performing gold mutual funds and explore what makes them stand out in a crowded market.
But first, let’s take a closer look at why you might consider adding gold to your investment portfolio in the first place.
Why Invest in Gold?
Gold has long been considered a safe haven investment during times of economic uncertainty. It’s seen as a reliable store of value that can help protect against inflation and currency fluctuations. However, gold prices can be volatile in the short-term, and the market for physical gold can be difficult to access.
That’s where gold mutual funds come in. By investing in a gold mutual fund, you gain exposure to the precious metal without the hassle of buying and storing physical gold. Gold mutual funds typically invest in a mix of gold mining stocks, bullion, and futures contracts, providing diversified exposure to the gold market.
So why might you consider investing in a gold mutual fund? Here are some of the potential benefits:
– Diversification: By adding gold to your portfolio, you can smooth out volatility and reduce risk. Gold often performs well during times of market turmoil, providing a counterbalance to more volatile assets.
– Inflation hedge: Gold is a popular hedge against inflation, as it tends to hold its value even as prices rise.
– Liquidity: While physical gold can be difficult to sell, gold mutual funds are much easier to buy and sell as needed.
– Potential for profit: Historically, gold has shown strong long-term returns. By investing in a gold mutual fund, you can potentially earn a solid return on your investment over time.
Now, let’s take a closer look at some of the top performing gold mutual funds available to investors.
1. VanEck Vectors Gold Miners ETF (GDX)
The VanEck Vectors Gold Miners ETF (GDX) is one of the largest and most popular gold mutual funds available. The fund invests in gold mining companies, providing exposure to the gold market while also diversifying across a range of stocks.
One of the key advantages of GDX is its relative stability compared to other gold mutual funds. While gold prices can be volatile, mining stocks tend to be less so. This can help reduce overall portfolio risk while still providing solid returns.
Over the past five years, GDX has shown a return of 31.7%, outperforming the S&P 500 by more than 20%. However, it’s worth noting that the fund can be somewhat expensive, with a management fee of 0.52%.
2. iShares Gold Trust (IAU)
For investors looking for a more direct exposure to the gold market, the iShares Gold Trust (IAU) is a popular choice. The fund invests exclusively in physical gold bullion, providing a direct hedge against inflation and market volatility.
One of the key advantages of IAU is its low cost. The fund has a management fee of just 0.25%, making it one of the most affordable gold mutual funds available.
Over the past five years, IAU has shown a return of 44.1%, outperforming the S&P 500 by nearly 33%. While it’s important to note that this return reflects only the performance of the underlying gold, rather than the performance of a diversified portfolio, it still demonstrates the potential for profit in the gold market.
3. Aberdeen Standard Physical Swiss Gold Shares ETF (SGOL)
Similar to IAU, the Aberdeen Standard Physical Swiss Gold Shares ETF (SGOL) invests solely in physical gold bullion. However, the fund has some key differences that might make it a better fit for certain investors.
One of the advantages of SGOL compared to other gold mutual funds is the fact that it stores its gold in Swiss vaults, providing an additional layer of security. The fund is also somewhat less volatile than other gold mutual funds, making it a potentially good choice for risk-averse investors.
Over the past five years, SGOL has shown a return of 44.6%, outperforming the S&P 500 by nearly 33%. The fund has a management fee of 0.17%, making it one of the most affordable gold mutual funds available.
4. Tocqueville Gold Fund (TGLDX)
The Tocqueville Gold Fund (TGLDX) takes a more actively managed approach to investing in gold mining stocks. The fund’s managers aim to pick stocks that they believe are undervalued, providing a potential boost to returns compared to more passive funds.
One of the advantages of TGLDX is its strong track record of performance. Over the past five years, the fund has shown a return of 59.9%, outperforming the S&P 500 by more than 48%. However, the fund can be somewhat volatile, making it a potentially better fit for investors with a higher tolerance for risk.
TGLDX has a management fee of 1.20%, which is on the higher end for gold mutual funds, but may be justified by the fund’s strong track record of performance.
5. Franklin Gold and Precious Metals Fund (FKRCX)
The Franklin Gold and Precious Metals Fund (FKRCX) takes a broad approach to investing in the gold and precious metals market. In addition to investing in gold mining stocks, the fund also invests in companies involved in silver, platinum, and other precious metals.
One of the advantages of FKRCX is its diversification. By investing in a range of precious metals, the fund provides exposure to a broader range of market trends and potential opportunities for profit.
Over the past five years, FKRCX has shown a return of 28.7%, outperforming the S&P 500 by more than 17%. The fund has a management fee of 0.95%, which is somewhat higher than some other gold mutual funds but may be justified by the fund’s diversified approach.
Choosing the Right Gold Mutual Fund
When it comes to choosing the right gold mutual fund for your portfolio, there are a few key factors to consider. Here are some things to keep in mind:
– Risk tolerance: Different gold mutual funds come with different degrees of risk. If you’re risk-averse, you may want to focus on funds with a history of stability, like SGOL or IAU. More risk-tolerant investors, on the other hand, may be drawn to more volatile funds like TGLDX.
– Investment approach: Some gold mutual funds take a more actively managed approach, seeking to pick stocks or time the market. Other funds take a more passive approach, simply investing in a diversified portfolio of gold assets. Consider which approach aligns with your investment philosophy.
– Fees: All mutual funds come with fees, which can eat into your returns over time. Consider the management fees of each fund and think about whether the potential returns justify the costs.
– Diversification: Some gold mutual funds, like FKRCX, provide exposure to a broader range of precious metals. By diversifying your investment across multiple metals, you can potentially smooth out volatility and reduce overall risk.
Conclusion
Adding gold to your investment portfolio can be a smart move, providing a reliable hedge against inflation and market volatility. However, with so many gold mutual funds available, it can be difficult to know where to start.
By focusing on performance, you can maximize your profit potential while also managing risk. The top performing gold mutual funds highlighted here represent some of the best options available, but it’s important to do your own research and consider your own investment goals and risk tolerance before making a decision. With the right gold mutual fund in your portfolio, you can potentially earn solid returns while also protecting against market downturns.