If you wish to invest in gold, your choices are:
Direct investments. One approach is to buy gold bullion or coins. This can provide a pure play on the price of gold.
However, holding gold directly means you have ongoing costs such as insurance or storage. You have no possibility of receiving any cash flow.
Mining companies. Alternatively, you can buy stocks in mining companies, or in mutual funds that hold those stocks. Such investments are convenient and there are no carrying costs (other than the expenses you pay as a mutual fund shareholder). You might receive some cash flow because some mining companies pay dividends to shareholders.
In addition, investors who buy mining company shares may benefit from profits that are greater than any percentage increase in the price of gold. According to Morningstar Inc., Chicago, precious metals funds gained more than 60 percent in 2002 and nearly 60 percent in 2003, while gold prices went up about 25 percent and 20 percent, respectively.
