Should Long-Tem Investors Consider Gold ETFs For Their Portfolio?

Having even a small amount of exposure to gold has traditionally been one of the ways long-term investors have protected portfolios against inflation and economic downturns since the beginning of time.

The logic goes that gold is something that is relatively stable. The amount of gold in the world does not increase at the pace of inflation, and therefore in good economic times with high inflation (which we haven't seen for some time), and in times when equities are sold off such as recessions, gold has proven to be a great hedge and a tool that many portfolio constructors use to provide portfolio insurance when everything else fails.

That said, some of the most iconic of investors, including Warren Buffett, have discredited the idea of owning a non-productive asset, as over time the inflation-neutral status of gold will deteriorate returns.

For a conservative long-term investor looking for gold exposure, I believe gold ETFs such as SPDR Gold Trust ETF (NYSE:GLD) are the way to go over buying gold bouillon or exposure to a single gold company. Simply put, gold ETFs track the performance of a basket of the largest and most liquid gold companies, reflecting quite well the movements of the commodity over time, reducing the idiosyncratic risk present with any given gold company or small group of gold companies. The kicker is, gold ETFs offer investors this exposure at a fraction of the cost of buying bouillon (storage costs), mutual funds or gold companies (fees).

Long-term investors should do their research with respect to which medium works best for them, and I would recommend digging into ETFs as a starting point.