The ETF Spotlight is on
iShares Gold Trust
Ticker Symbol: IAU
Family: iShares by BlackRock
Exchange: NYSE Arca
Brief:
IAU seeks to reflect generally the performance of the price of gold. Because of that, it may provide investors a way to hedge an existing equity portfolio in market declines.
Objective:
IPE intends to provide investors a way to create a hedge against stock market decline.
You generally want to consider precious metals, like gold, when financial asset like stocks and stock funds are in decline. Why? Because gold is uncorrelated to equities, that is, it has a negative correlation and doesn’t move in the same direction at the same time as stocks. Assets that do move in the same way at the same time are considered to have a positive correlation.
In declining stock markets, investors are looking for a hedge, more of a safe harbor bet beyond stocks. iShares Gold Trust is a good choice for those who do not want to own physical gold under personal safekeeping or custody.
For the last several years, gold has moved opposite of stocks. When one zigs, the other zags!
Where it may fit in a portfolio:
Precious metals, specifically gold, can play an important role in a conservatively allocated portfolio. Gold, however, is a speculative investment when purchased alone. Regardless of your world view, a portfolio of 100% is just not smart, but allocating up to 5-10% in a balanced portfolio can make a lot of sense, and is an allocation range generally agreed upon by most financial planners and investment advisors. To be clear, 5-10% is just a general range, but only individual objectives should determine any asset’s weighting in a portfolio.
Similar trusts to research:
ETFS Physical Swiss Gold (SGOL)
Invesco DB Gold (DGL)
SPDR Gold Shares (GLD)
GraniteShares Gold Trust (BAR)
May appeal to:
Any investor who believes that we may be heading into a declining market that wants to hedge against long portfolio declines. ( From iShares site: The iShares Gold Trust is not a standard ETF. The Trust is not an investment company registered under the Investment Company Act of 1940 or a commodity pool for purposes of the Commodity Exchange Act. Shares of the Trust are not subject to the same regulatory requirements as mutual funds.)