How to Include Gold in Your Investment Portfolio

Investing in gold doesn't always mean buying gold bars.
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While a discussion of owning gold may produce images of gold bars tucked away in a vault or gold coins stored in a safe deposit box, the range of gold investment options includes those that involve no physical contact with the precious metal. You can add gold to your investment portfolio with certain stocks, mutual funds and exchange-traded funds offered by brokerages.

Step 1

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Buy stock in a gold mining corporation. This will allow you to gain indirect gold exposure. Tom Kerr, a portfolio manager with Rocky Peak Capital Management in Calabasas, California, recommends potential investors look for small gold mining companies with solid balance sheets and good operating cash flow. Mining stocks allow you to invest in a real operating business that can grow over time, he says. He notes that these smaller companies are often acquired by larger, international gold companies.

Step 2

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Invest in a mutual fund that holds gold bullion. Be aware, however, that not every mutual fund that touts an investment in gold is necessarily buying the real thing. Tim Higgins, a financial planner in Southborough, Massachusetts, says that precious metal mutual funds typically invest in mining companies -- not the metal itself. Pricing behavior therefore will be influenced by market factors above and beyond the price of the commodity.

Step 3

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Buy a gold exchange-traded fund. ETFs are baskets of stocks, like mutual funds, but they are traded continuously on the financial markets like stocks -- rather than priced just once a day like mutual funds. With gold ETFs, you are not buying physical gold but an investment that tracks the price of the commodity, net of the fund's expenses.

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