Recently, while reorganizing my investment portfolio, I started seriously researching the topic of gold ETFs—and found that this kind of product really is a good hedging tool. As “hard currency,” gold can help combat inflation and, when the stock market is volatile, help you diversify your risk. Meanwhile, gold ETFs cleverly combine traditional gold investing with modern fund models.

Gold ETFs are mainly divided into three categories: spot gold ETFs, which directly hold physical gold; derivative gold ETFs, which operate through futures contracts; and gold stock ETFs, which track mining companies. Compared with directly buying gold bars (which may cost tens of thousands), gold ETFs let you participate with just a few hundred, and trading is as simple as buying stocks. What’s more, the costs are only 0.2%-0.5% in management fees—far lower than the 5%-10% transaction fees for physical gold.

I looked into the mainstream products in the market. In the US, GLD and IAU are the most popular. GLD has assets under management of over 56 billion USD, and IAU’s management fee is even lower at just 0.25%. Both track the international spot gold price. In Taiwan, Yuanta S&P Gold ETF is the largest, with assets under management of more than 2.5 billion USD, and also the highest liquidity—making it especially suitable for beginners. Based on data from March 2024, US gold ETFs have indeed been more stable than Taiwan’s over the past few years, with a five-year cumulative return of over 60%.

There are a few strategies for investing in gold ETFs that I think are good. First is building a diversified portfolio—allocating proportions of stock index funds, bond funds, and gold ETFs according to your risk preference. Second is investing on a regular schedule: buying a fixed amount every month. This averages your costs and helps you avoid chasing highs or selling at lows. Third is to buy more when prices are low and buy less when prices are high, but this requires some judgment about the market. Another very important point is to set a profit target (usually 30%-50%), and once you reach it, you should take your profits.

When choosing a gold ETF, you should consider the reputation of the issuing institution, whether the asset size is large enough, whether liquidity is sufficient, whether the management fee is reasonable, and what its historical performance looks like. Products with a larger asset size typically have better liquidity and are easier to buy and sell. Personally, I tend to recommend GLD or SGOL in the US market. The former is an industry leader, while the latter has average liquidity but offers physical redemption options.

To be honest, what attracts me most about gold ETFs is their flexibility and low cost. You don’t need to worry about custody, and you don’t have to be forced into frequent trading. With regular investments over three to five years, you can see the “small gains add up” effect. Recently, I’ve also been keeping an eye on the market for some related assets on Gate, and it feels like this kind of investment really is suitable for medium- to long-term allocation. If you’re also considering strengthening your portfolio’s ability to withstand risk, gold ETFs are worth seriously researching.