Gold can capture the imagination. It glitters in our tales and stories. For investors, though, gold prices can be volatile, especially within short periods. This reality doesn’t always deter investors from holding some form of gold within their diversified portfolio. Today we are looking at 3x gold ETFs and the value they carry within a stock portfolio.
Gold is a historical superstar in the world of precious metals. Gold coins have been used for thousands of years, dating back to around 800 B.C. Throughout various societies, gold has been used as a form of currency, placing a greater value on this commodity. These characteristics make it a hedge against both inflation and deflation. In times of economic or political uncertainty, gold shines, and 3x gold ETFs provide leverage to investors holding them.
Choosing to invest in gold ETFs
There are many ways to invest in gold. Investors can buy gold coins or bullion to own physical gold. However, owning physical gold is not necessarily the best investment vehicle to generate returns. If an investor mainly buys gold coins as a hobby, then the return on investment isn’t the primary concern. Investors trying to generate returns from gold investing, however, should focus on another strategic approach, because physical gold comes with additional expenses like insurance or storage fees.
Gold stocks and gold ETFs are two of the most common methods for investing in gold to make a profit. Buying a single gold stock could be profitable if you select the right stock. Choose poorly, however, and you may be exposed to greater levels of market, sector, or company risk. On the other hand, a gold ETF tracks the value of the gold price and comes with diversification built in. A gold ETF can be an attractive investment for speculative investors, especially if the gold ETF in consideration provides low costs, tax efficiency, and stock-like features. These investments are also highly liquid, making it easy to trade them at will.
Understanding the benefits of 3x gold ETFs
3x gold ETFs provide leveraged exposure to the gold futures market. This can pay off if you feel strongly about the direction of the gold market because these leveraged 3x gold ETFs can pay three times the daily or monthly return of gold prices. These ETFs utilize futures contracts, so investors who target futures investing often have a greater propensity towards these investments.
The tricky part of investing in 3x gold ETFs is short-term speculation. Over the long-term, gold historically has maintained its value. If you opt to hold one of the 3x gold ETFs over a more extended period of time, there would be an opportunity to profit. The issue here is that many investors look to these investment vehicles for short-term exposure. Since gold is volatile in short-term markets, this makes investing in 3x gold ETFs harder. Remember, investors holding 3x gold ETFs have the chance to make three times the amount in a daily or monthly period, but they could also lose the same amount.
If you want to buy 3x gold ETFs, make sure you realize the risk and volatility you’ll endure. Stick with longer-term gold ETFs if the volatility and speculation are too much for your investing temperament.
How do you incorporate gold into your diversified portfolio?