If you’re looking to diversify your portfolio and add precious metals to your investments, Fidelity offers a variety of ways to do so. But before you decide, it’s important to understand the risks and fees involved.
Investors can choose to invest in gold via stocks, mutual funds, ETFs, and commodities futures. All of these options can provide exposure to the price of gold, but they also come with different risks and fees.
Direct Investing
Direct investing is a type of investment strategy that involves investing directly in companies, usually through a private equity fund. This strategy may allow investors to take advantage of fee savings and enhanced returns, which could lead to increased profit potential over the long run.
Direct investments can be in the form of privately issued equity or debt, and they are a great way to diversify your portfolio. However, they come with a lot of risk and require a high level of expertise.
This strategy has become more popular recently across a range of investors, thanks to lowering trading costs and advancing trading technology. Investors can implement this strategy on their own or via a professionally managed account.
Direct indexing is a popular strategy, which allows investors to invest in individual stocks instead of mutual funds or ETFs. This can allow for tax-loss harvesting, which can help to manage your overall tax burden. It can also enable investors to track specific stock or index benchmarks without paying expensive commissions.
Mutual Funds
Mutual funds are a popular option for investors who want to diversify their portfolio. These investments pool money from many people to buy a variety of assets, usually focusing on stocks or bonds.
A mutual fund invests on your behalf, making investment decisions in line with its investment objective. You own shares in the fund, and these shares represent a share of the fund’s total asset value.
When you own a mutual fund, the value of your shares increases if the price of your fund’s securities increases. This is known as capital gain.
Any earnings that your fund earns are distributed to you in the form of dividends and interest. These can be reinvested or used to purchase more shares.
Some brokers offer zero-cost or low-cost mutual funds. These can be a good way to get exposure to gold without the costs associated with purchasing physical precious metals or dealing with other fees.
ETFs
ETFs are a great way to invest in a broad range of securities, while also getting the diversification of a mutual fund. They are available through online broker-dealers and traditional brokers as well as robo-advisors like Betterment and Wealthfront.
Many ETFs track an index, which means that they track the price of a stock, bond, or commodity. They trade continuously during normal market hours, allowing investors to know within moments how much they paid to buy shares and how much they are receiving when selling them.
The downside is that ETFs can get crowded, which could affect their attractiveness and liquidity. For example, a bank loan ETF might suddenly attract a lot of money, which could decrease the value of its assets and reduce returns.
IRA owners may be able to invest in certain US gold, silver, and platinum coins and bullion through their ETFs. However, the IRS has ruled privately that IRA owners will not receive a taxable distribution of gains from these investments.
Individual Stocks
If you want to invest in individual gold companies, Fidelity has a number of options for you. These include both ETFs and stocks that are tied one way or another to the gold market.
When evaluating individual stocks, it’s important to understand your own risk tolerance and investment goals before making a purchase. This will help you make decisions about whether investing in individual stocks or mutual funds makes the most sense for your portfolio.
Typically, mutual funds are better for long-term investment plans where diversification is essential. However, investors can also choose to buy individual stocks if they are willing to take on more risk.
To determine whether a stock is right for your portfolio, consider factors such as the company’s financials, leadership, past performance, cash reserves and more. You can also ask an advisor for help to evaluate your investment options.
