Posted in Finance, Accounting and Economics Terms, Total Reads: 78
Definition: Gold Fund
Gold Fund is an Exchange Traded Fund (ETF) similar to a mutual fund where the fund manager tracks the stock indices or specific sectors hence the exposure is to the entire market. In an ETF the entire investments are known to investors which is not the case with a Mutual Fund. The main aim of a fund manager of a Mutual Fund is to give a return more than the benchmark stock index hence the commissions are more in an MF, the aim of a fund manager in an ETF is to give a return equivalent to the benchmark index chosen.
Hence it is not actively managed and the costs and commissions are lower than the Mutual Fund. Now Gold Fund is an investment either directly in gold or in stocks of company that mine gold. The advantage here for the investor is that they don’t acquire any physical gold what they get is e-gold and usually at a cheaper rate than the market rate for physical gold. The investor can then keep that e-gold in their ‘demat’ account and can sell off whenever it is feasible for them. One more advantage here is that there is no possibility of theft in case of e-gold.
The other way to get a gold fund is to invest in stocks of Gold mining companies. These stocks move with the performance of these companies and the value changes as per the Stock Markets. Gold ETF’s are investments when the underlying asset is gold, these prices usually go up when the financial markets are in decline and the prices go down when the markets go up. This is a relationship in movement of gold prices and the stock markets as observed in general.