Some experts recommend a small amount of gold (5% or less) exposure in a portfolio, either through bullion or gold equities. There are many ways of gaining exposure to gold (equity or bullion) in a portfolio:
- The iGold Index fund (TSX: XGD) has a MER of 0.55% and has large holdings in Barrick Gold (TSX: ABX, NYSE: ABX) and Placer Dome (TSX: PDG, NYSE: PDG).
- The closed-end fund Central Fund of Canada (TSX: CEF.NV.A, AMEX: CEF), which holds gold and silver. Note that the fund may trade at a premium or discount to underlying assets.
- Central Gold Trust (TSX: GTU.UN), a unit trust that holds physical gold bullion.
- The Millenium Bullion Fund, an open-ended fund, which invests equal dollar amounts in gold, silver and platinum. Its MER seems steep at an indicated 2.75%.
- The new wildly successful streetTRACKS Gold Shares (NYSE: GLD), whose shares trade at 1/10 the price of an ounce of gold. The expense ratio is only 0.40% and the shares are expected to closely track the price of gold.
- Physical bullion like Gold Maple Leaf coins offered by the Royal Canadian Mint. Investing in physical gold has additional costs like storage and insurance and also high initial costs like high bid-ask spreads, taxes etc.
The risks involved in gold investing (some call it speculating) are described nicely in this article. Any portfolio allocation to gold should be very carefully considered, keeping in mind the significant risks involved.
