Compare Gold ETF ISAs

What are gold etf ISAs?

Gold etf ISAs are a type of commodity fund ISA. An ETF is an exchange traded fund with shares which are traded on a stock exchange. A gold ETF can be used to hedge gold commodity risk or gain exposure to the fluctuations of the gold price.

1. Funds that invest directly in commodities, e.g. precious metals such as gold or natural resources. These are 'true' commodity funds, in that they are direct investments in the commodity itself.
2. Funds that invest in commodity-linked derivatives. This is a common investment strategy within the commodities market as it allows investors a rate of return that's linked to the future market performance of their chosen commodities.
3. Funds that target shares in commodity-related companies, such as agriculture, energy, or mining companies. These investment products are also known as natural resource funds, and focus on companies operating in the commodities market, rather than on the commodities themselves. Investments may be made in industries such as mining, agriculture, oil, and energy.
4. Funds that invest in a combination of the above. Some fund management plans allow you to invest in commodities and commodity-linked derivatives. So, you could invest in a fund that encompassed both gold bullion and gold futures.

What are the benefits of investing in commodity fund ISAs?

1. They ISA wrapper is tax-efficient. By investing in a commodity fund ISA, you benefit from not paying capital gains or income tax on any potential returns.
2. Commodities offer an opportunity to diversify your investment holdings away from traditional plans such as shares and bonds. Having a diverse portfolio can help to cushion your investments against any falls in particular areas because it allows you to avoid putting all your eggs in one basket.
3. Although the risks are high, the returns have the potential to be similarly high. This may be linked to the recent emergence of new economic powerhouses such as China and Indonesia, which require a lot in the way of resources to support their rapidly-developing commerce and infrastructure.

What do investors need to be aware of when considering commodity fund ISAs?

1. Commodities investments require you to be comfortable with risk, as well as prepared to take a long-term approach to reaching your financial goals.
2. Some funds place limits on the percentage of the portfolio that can be invested in a single commodity, in order to avoid too much focus on a single investment area.
3. There may be charges involved in transferring current ISA balances to a commodities fund ISA, so check with your chosen provider.
4. The commodities market is notoriously volatile and is high risk investment area. It's therefore generally better suited to experienced investors. As with all investments, if you're unsure, seek independent financial advice.