ETF stands for Exchange Traded Fund.
Simply put, it is an investment fund that is traded on the stock exchange that holds assets such as stocks, commodities or bonds.
If you look at gold ETFs such as IAU iShares Gold Trust, they advertise that you have:
- Exposure to day-to-day movement on the price of gold bullion
- Convenient, cost-effective access to physical gold
- Used to diversify your portfolio and help protect against inflation
When you invest in this fund, you simply get a piece of paper saying that you own “X” number of shares. They claim that you are actually buying shares that can be turned into physical gold and they are giving you “claim check” in the form of a monthly statement on a piece of paper.
These shares are also referred to as “paper ounces”.