• Stocks & Shares ISAs - What are they - How to use them

ETF stands for Exchange Traded Fund which are funds traded on the stockmarket like shares. Buying Gold ETFs is exactly the same procedure as buying shares in any other company, for example, 100 or 1,000 ETFs.

Gold ETFs invest in the physical metal which is stored in bank vaults. As more people buy the Gold ETF, more physical Gold is bought and vice versa. So theoretically by investing in the ETF you own a percentage of the metal stored in the vaults.

The Gold ETF will also be priced directly on the movement of the Gold price. So if Gold were to rise or fall by 10%, the ETF would mimic this price movement.

The other advantage to ETFs is that they're cheap to run.

Conventional funds traditionally charge between a 1.5% - 2.5% annual management fee but ETFs charge in the region of 0.15% - 0.75%.

Whereas these savings don't look like much they add up over the years. Saving 1% per year for investors with a long term outlook is a massive advantage.

• See also - The different ways to invest in Gold

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