How Gold ETFs Really Behave In a Portfolio | ETF Trends

Investors love gold and gold exchange traded funds (ETFs) – that’s no secret. But the reasons it’s so prized are many and varied.

Gold is well-known as an investor favorite for its use as a hedge and as a diversification tool within a portfolio. Gold ETFs are well-known for these exact reasons, too. However, there are many other facets of a gold ETF and its role in a portfolio than what’s on the surface. Juan Carlos Artigas for Index Universe explains why investors really dig gold in their portfolios:

  • The global nature of the gold market and its many uses make it a unique asset. While gold delivers protection in both long- and short-term turmoil, its uses go far beyond that. [Gold ETFs: Is There Life Left?]
  • Gold can reduce the volatility of a portfolio without necessarily sacrificing expected returns.
  • Gold delivers better risk-adjusted returns and can help mitigate the potential for loss.
  • Gold’s volatility has been overstated. Over the past 20 years it’s been around an average of 15%.
  • Gold bullion has no credit risk and carries no counterparty risk. [Commodity ETFs: Are They Too Popular?]

Heading into the new year, gold’s appeal is still going strong. GDP growth in emerging economies and an expanding middle class in places such as China and India have added to investment, industrial and jewelry demand. Over the past five years, about 60% of demand for gold came from jewelry, where growing economies such as India and China play a preeminent role. About 30% of demand came from investment and the remaining 10 % from technology.

If you’re concerned that gold has hit a top, read this and consider the benefits it could give your own portfolio. Then investigate your options.

Tisha Guerrero contributed to this article.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.