Get into gold in different ways

Investors can buy metal or stocks, use funds or ETFs, but caution advised

April 08, 2008|By McClatchy-Tribune

RALEIGH, N.C. -- Gold comes in a variety of flavors when it comes to investing.

You can buy the metal itself - gold coins and gold bullion. You can buy shares of individual gold-mining companies or mutual funds that invest in a slew of mining businesses. Then there are ETFs, or exchange traded funds - you buy and sell them like stocks - that track the price of gold.

Be aware, however, that investment experts are split about whether investing in gold in any shape or form is wise.

Some counsel that gold has a place in a well-rounded, diversified investment portfolio, but that investments in it and other commodities should not exceed 5 percent of your total investments.

If you invest in gold, you need to make it part of a long-term strategy rather than deciding to take the leap because it has suddenly become the investment du jour, investment experts say.

"When your neighbor is telling you to buy gold, it's probably too late," said Steven Katzenstein of HPG Wealthcare Advisors in Raleigh.

And like most commodities, gold is very volatile. If you are going to lose sleep every time gold falls in value, invest your money elsewhere.

Gold is attracting a lot of attention because it recently broke the $1,000-an-ounce barrier, triple its price in 2003.

"Gold, traditionally, has not been a great investment," Katzenstein said. "But it has great streaks."

Bill Dix, president of Raleigh investment management firm Fortune Management, contended that the average investor should steer clear of all that glitters.

"It's sort of like gambling in Vegas," Dix said. "You don't have the odds on your side."

If you are interested in investing in gold, here's a rundown of the different ways of doing it:

Coins and bullion: They glitter. You can hold them in your hand. But make sure you're buying them from a reputable dealer who charges a reasonable price. You need to make sure the gold is stored in a safe-deposit box or a heavy-duty home safe.

And when you're ready to sell, it will take some effort.

"If you go to four different tables at a coin show, you'll get four different prices," Katzenstein said.

Also, the Internal Revenue Service classifies gold as a collectible. Consequently, your capital gains are taxed at a much higher rate than with stocks and bonds.

Mining stocks: Investing in mining stocks "is actually riskier than buying the metal," said Gerald A. Townsend, president of Townsend Asset Management in Raleigh.

Mining companies tend to have lots of debt and, as a result, their profitability fluctuates wildly with the price of gold, he said.

Publicly traded gold mining companies include Barrick Gold and Newmont Mining.

Mutual funds: These funds focus on companies that mine gold and other precious metals. When you invest in one fund, you're investing in a number of companies and therefore spreading your risk somewhat.

Mutual funds in this category include Franklin Gold and Precious Metals Fund, Tocqueville Gold Fund, First Eagle Gold Fund and Oppenheimer Gold and Special Minerals Fund.

Exchange traded funds: ETFs offer many of the benefits of owning gold, minus some of the hassles. You don't have to worry about storage, and you can sell ETFs easily.

ETFs include StreetTracks Gold and iShares Comex Gold.

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