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Sep 2020

Going for Gold: What is a Gold ISA, and Why Should I Consider One?

Going for Gold: What is a Gold ISA, and Why Should I Consider One?

If you’re an experienced investor and are looking to diversify your portfolio, then you might be considering a Gold ISA as an option. But what exactly is a Gold ISA, and why should you consider getting one? We’ve put together a blog with everything you need to know before opening a Gold ISA. 

What is a Gold ISA?

A Gold ISA is a specific kind of ISA: it’s a type of commodity ISA. This is where your money is invested in goods rather than other vehicles such as companies. Examples of commodities covered by a Gold ISA include a range of goods and various materials including: fuels, staple foods and precious metals – hence the name Gold ISA.

What are the different types of commodity fund ISAs?

  • Funds that invest directly in commodities:
    such as gold, natural resources, precious metals etc. This is the ‘purest’ form of a commodity ISA fund, because it is the investor putting their money directly into the commodities themselves.
  • Funds that invest in commodity-associated derivatives:
    this is a common approach in the commodity market, as it lets investors get a rate of return which is linked more to the future performance of the market of their commodity of choice.
  • Funds that invest in shares of companies related to commodities:
    this allows investors to put their money behind companies working in industries such as agriculture, energy or mining. These can also be termed natural resources funds.
  • Funds which invest in a combination of all of the above:
    this very much does what it says on the tin. These funds are a hybrid of the other three types of funds described here.

Why should I consider getting one?

  • Because it is an ISA account, this is a very tax-efficient method of investing, as your returns will be protected from capital gains or income tax. You can invest up to £20,000 per year in any ISA, so if you’re looking to invest directly in commodities, then a Gold ISA is a good idea.
  • By investing in a commodity or commodities you can diversify the type of investments you have in your holdings. This means you can hold both traditional bonds and non-traditional investments to ensure you’ve not got all your eggs in one basket.
  • While these accounts do have a higher associated risk, they also have an associated higher return rate.

What do I need to know before opening one?

  • You need to be comfortable with the higher degree of risk
  • You need to be comfortable with a longer term approach to investing, as it might take more time to reach your financial goals.
  • There might be limits put on by some fuds on the percentage of the portfolio which can be put into one single type of commodity.
  • You might be charged for transferring an existing ISA into a Gold ISA but this depends on the provider.
  • The commodities market is volatile – it comes with a high associated risk. Therefore, if you have experience in investing then it could be for you but if you have less experience or are a first-time investor, then this is unlikely to be the account for you. 

Read more about Gold ISAs. 

Important Risk Information:

The value of investments can go down in value as well as up, so you could get back less than you invest. It is therefore important that you understand the risks and commitments. This website aims to provide information to help you make your own informed decisions. It does not provide personal advice based on your circumstances. If you are unsure of how suitable an investment is for you, please seek personal advice.

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