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Author: Gold Why Webmaster
Date: August, 2009
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Question: Being new to gold, how do I buy gold in a brokerage account? I hear the word "brokerage" and think of greedy account managers that don't want to be bother by a "small potato" investor. Any help would be appreciated.

Answer: This is an awesome question, one I have not covered in too much depth just yet. Thank you for asking! There are a few different ways you can purchase gold in your stock brokerage account. The easiest one for the majority of gold investors is the streetTRACKS Gold Trust SPDR Gold Shares exchange traded fund, known to most people as GLD. This sounds confusing, but it's actually not! Basically, GLD is an exchange traded fund that trades on the New York Stock Exchange just like a stock. When you buy shares of GLD, you are investing in an unallocated gold fund. The performance of shares in GLD mirror the price of gold minus fees (at 0.4%). Owning gold through the GLD fund is as simple as logging into your stock brokerage account and placing an order to buy shares in stock ticker GLD!

Another way to own gold through your stock brokerage account is investing in the Central Fund of Canada with ticker symbol CEF. This is a closed end mutual fund that owns both gold and silver bullion. One of the great things about CEF is they have proven reserves of gold and silver in a vault. They have proven reserves of metal to back up the fund. In contrast, some investors argue that GLD is just "paper gold". Some argue: Because GLD is not closed end and there are many transactions each day, how could they possibly buy and sell all the gold bullion to back up the fund? Personally, I'm all about diversification, so why not consider a hybrid strategy where you own some GLD and also some CEF. It's always important to hedge your bets with any investment. One word of caution: I have read that there may be special tax reporting requirements for owners of CEF who live in the US. Make sure to do your due diligence before buying CEF so you understand all of the special requirements - I personally have not looked into this, but hoping to at some point (I don't own any CEF).

The last way to own gold through your stock brokerage account is investing in shares in gold mining companies. This is more of an advanced strategy because you're no longer buying gold bullion, but are now buying shares in companies that have reserves of gold in the ground. These companies are valued on their gold reserves in addition to their ability to extract them from the ground in a cost effective manner. I have written a few articles on investing in shares of gold mining companies (links below) and recommend checking them out. One company to consider for the base of your gold mining company portfolio is Goldcorp (ticker GG). You'll want to do your own research but this is a company I respect quite a bit.

So now you know three easy ways to own gold right in your stock brokerage account. However, to be able to do this you need to open a brokerage account. Don't worry, this is super easy and cheap these days. There exists a great selection of online stock brokers with very low fees. Some super examples are Scottrade, TD Ameritrade, and ShareBuilder. When you open your first brokerage account, you'll want to investigate fees, both per transaction but also for account inactivity. I'm a small buy and hold investor and really appreciate brokers that charge no inactivity fee. Moreover, many brokers offer incentives these days to open a new account. Try to get some "free trades" with your new broker! With online brokerage accounts, you get a great value and investors of all sizes have the opportunity to invest in the gold stocks discussed above. Whether you have $500 or $5,000 to invest, there is an online brokerage account for you. Hope this helps and best of luck buying gold bullion through your new stock brokerage account. Have a question about gold? Feel free to submit your own gold question.

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