Gold ETFs and mutual funds offer exposure to gold's long-term stability as well as greater liquidity and diversification than physical gold and individual gold stocks. There are many types of gold funds.

Gold mutual funds such as Franklin Templeton's Gold and Precious Metals Fund are actively managed by professional investors. The objective of these funds is to outperform passively managed index funds in terms of returns. To compensate, they charge relatively high expense ratios.

As with gold stocks, investors are not buying gold but rather paper that is theoretically backed by mining company debt or equity or by futures and options contracts on physical gold. Therefore, gold mutual funds and exchange-traded funds may not always track the spot price of gold, and these investments may not perform as well as physical gold.