Question
I have some ETF shares where the fund owns Physical Gold. I also own some physical gold directly. One asset is shares and the other is metal. There are different risks and liquidity benefits too. Hence reasons to own one or other or both types. But both tend to track the gold price (excluding costs). Am I correct to treat these as separate assets with regard to recording capital gains or losses or should they be lumped together as "gold investment"? Thank you.Answer
For the purposes of monitoring asset allocation (i.e. the split between different investment types) in your portfolio I'd be inclined to lump them together as 'gold investment' as performance of both should be near identical (excluding charges).
But when it comes to recording capital gains/losses for the purposes of tax then you'll need to treat them separately. Capital gains tax applies to individual investments, so each will need to be accounted for whenever you sell and realise a gain or loss.
For the benefit of other readers: does it make sense to lump together shares in gold mining companies and/or funds investing in such shares with physical gold and gold ETFs when monitoring your portfolio?
It really depends on how pernickety you want to be. Performance of all is linked to the gold price, so if you want to keep things simple then viewing them together as 'gold exposure' is fine. But gold shares (hence funds) generally react more aggressively to changes in the gold price, so tend to be more risky. You might therefore categorise them as 'higher risk gold exposure'.
I have some ETF shares where the fund owns Physical Gold. I also own some physical gold directly. One asset is shares and the other is metal. There are different risks and liquidity benefits too. Hence reasons to own one or other or both types. But both tend to track the gold price (excluding costs). Am I correct to treat these as separate assets with regard to recording capital gains or losses or should they be lumped together as "gold investment"? Thank you.Answer
For the purposes of monitoring asset allocation (i.e. the split between different investment types) in your portfolio I'd be inclined to lump them together as 'gold investment' as performance of both should be near identical (excluding charges).
But when it comes to recording capital gains/losses for the purposes of tax then you'll need to treat them separately. Capital gains tax applies to individual investments, so each will need to be accounted for whenever you sell and realise a gain or loss.
For the benefit of other readers: does it make sense to lump together shares in gold mining companies and/or funds investing in such shares with physical gold and gold ETFs when monitoring your portfolio?
It really depends on how pernickety you want to be. Performance of all is linked to the gold price, so if you want to keep things simple then viewing them together as 'gold exposure' is fine. But gold shares (hence funds) generally react more aggressively to changes in the gold price, so tend to be more risky. You might therefore categorise them as 'higher risk gold exposure'.
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