This ETF has given investors a golden opportunity

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One good thing about investing with exchange-traded funds is that you are not limited to investing in the stock market. ETFs are now available for a wide range of different asset classes, ranging from bonds, cash equivalents, real estate, and cryptocurrencies. It is now possible for investors to build a fully diversified portfolio using only different types of exchange-traded funds.

However, this was not always the case. It took pioneers in the ETF universe to come up with ways to expand into new types of markets. A particularly interesting story comes from the world of commodities, where SPDR Gold Shares (NYSEMKT: GLD ) Is the most successful ETF over time. With the price of gold recently rising to $5,000 per ounce, interest in the precious metal has never been higher. It makes time for now Voyager Portfolio To take a closer look at this fund, and in this first article in a three-part series, you’ll learn about the history of SPDR Gold Shares and how it came to be a leader in the ETF world.

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A bag of gold bars with one on the front. — Image source: Getty Images.

Few ETFs have made as big a difference in their markets as SPDR Gold. Consider: d SPDR S&P 500 ETF (NYSEMKT: SPY ) May be the first exchange traded index fund, but there are existing index mutual funds that were already available to investors. The SPDR S&P 500 just made it possible to get exposure to a major stock market index at any time during the trading day.

Conversely, SPDR gold filled a void in the investment world that many advocates of the precious metal desperately wanted to eliminate. Before SPDR Gold, if you wanted to invest in gold, you pretty much had to go to a coin dealer and buy the physical coins or bars yourself. This presented a few problems. First, dealers will inevitably charge a significant markup when you buy gold coins, and if you later want to sell them, you’ll often get a discount price that introduces a much wider spread between the dealer’s bid and prices. In addition, every time you want to buy or sell, you have to visit the dealer’s physical location, or else deal with expensive mail transfers with insurance and other complications. And finally, once you have the gold, you have to figure out what to do with it. Whether you’ve bought a safe for your home, rented a safe deposit box at a local bank, or taken other measures, storing your gold also comes at a cost.

In this context, SPDR Gold represents a major shift in investment sentiment when it comes to buying and selling gold. The idea behind SPDR Gold was that the ETF would issue shares that represented one-tenth of an ounce of gold. With the proceeds from selling the shares, the fund will go out and actually buy bullion of physical gold and hold it in a central location. Although shareholders could not exchange their shares directly for actual gold, just knowing that gold was enough to redeem the value of the shares.

SPDR Gold has had huge gains. You can buy and sell shares like any other stock or ETF, using electronic brokerages and never dealing with a coin dealer or physical gold. SPDR Gold takes care of acquiring, storing, and insuring the gold on its property, charging a relatively small annual expense ratio to offset these costs.

With the availability of SPDR gold, gold investment became popular. But despite its recent popularity, it doesn’t always seem like a worthwhile investment. The second of three articles on SPDR Gold looks at gold ETF returns and how shareholders have fared over its 20-year history.

Before you buy stock in SPDR Gold shares, consider this:

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Dan Kiplinger has no position in any of the stocks mentioned. The Motley Fool has no position in the stocks mentioned. Motley Fool has a disclosure policy.

This ETF Gives Investors a Golden Opportunity was originally published by The Motley Fool

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