The challenge: Maria Bekiaris

The precious metal can help reduce volatility in a portfolio

Diamonds may be a girl’s best friend but gold can play an important role in an investor’s portfolio. Stockspot’s Chris Brycki says gold is an excellent portfolio risk-reduction tool. “During times when assets such as shares are falling, gold often rises, which helps to cushion the impact of sharemarket volatility,” he says. “Gold also acts an insurance policy against your home currency losing value.”

So there is a strong case for holding a small amount of gold in your portfolio but it should never be a large part – many experts say no more than about 10%.

One way to get exposure to gold is to invest in gold mining companies listed on the Australian sharemarket, such Newcrest Mining (NCM) and Kingsgate (KCN), or through an ETF such as the VanEck Vectors Gold Miners ETF (GDX).

But how do you invest in physical gold? One of the best ways is through a physically backed exchange traded fund (ETF). They invest in gold bullion, which is stored in vaults, and they track the gold price.

There are four currently listed on the ASX: ANZ ETFS Physical Gold ETF (ZGOL), BetaShares Gold Bullion ETF – Currency Hedged (QAU), ETFS Physical Gold (GOLD) and Perth Mint Gold (PMGOLD). PMGOLD is the cheapest with a management fee of 0.15%, ZGOL and GOLD both cost 0.40% while BetaShares charges 0.49%.

BetaShares is the only hedged option so with the others you need to remember that the exchange rate will play a role in the value of your investment.

Another option is ABC Bullion’s Gold Saver. You can set up a direct debit to make regular investments. ABC Bullion converts this money into physical gold the day it receives the money. Your savings are then linked to the price of gold. Regular savings can be made weekly, fortnightly or monthly and you can deposit from $50 up to $5000 per instalment. The transaction cost is 2% but you’ll pay no storage fees. You can also sell back your gold to ABC Bullion at any time or you can request your investment is converted into physical bars for you to hold yourself, although fees will apply.

Finally you can buy physical gold bullion or coins from providers such as Perth Mint, ABC Bullion and Gold Bullion Australia. The drawback of this option is that it does not pay an income while it’s in storage so you’re really relying on prices to rise and you’ll need to get the timing right to profit.

You will pay a premium on the gold price so it’s a good idea to shop around and compare premiums and commissions.

You will want to make sure you have a suitable place – such as a safe deposit box – to keep it. Reputable gold merchants can also store it for you but you’ll have to pay. For example, Perth Mint charges 1%pa for gold storage.