Gold ETFs that fit the Boglehead approach
The two gold ETFs most aligned with Boglehead principles are GLD (SPDR Gold Shares) and IAU (iShares Gold Trust). Both track the spot price of gold, hold physical metal in vaults, and charge low expense ratios — GLD at 0.40% and IAU at 0.25% annually. The choice between them comes down to fund size, expense ratio, and which brokerage offers lower trading costs on your account.
Bogleheads prioritize low costs, transparency, and funds that do what they claim without complexity. Both GLD and IAU meet these criteria. GLD is larger (over $60 billion in assets) and more widely held, which means tighter bid-ask spreads when you buy or sell. IAU costs less to hold annually but may have slightly wider spreads on some brokerages. Neither fund uses leverage, derivatives, or active management — they simply hold gold bars and pass through the price movements to shareholders.
A third option, SGOL (iShares Gold Strategy ETF), exists but is smaller and less commonly recommended within Boglehead circles because it adds a layer of strategy overlay that conflicts with the core principle of simplicity.
Key Takeaways
- GLD and IAU are the two main physical gold ETFs; GLD is larger with tighter spreads, IAU has a lower annual fee.
- Both hold actual gold in vaults and track spot price directly, with no leverage or active management involved.
- Bogleheads typically hold gold as a small portfolio diversifier (5–10% at most), not as a core holding.
- Your choice between GLD and IAU should depend on your brokerage's trading costs and your account size, not on performance predictions.
- Gold ETFs are taxed as collectibles at 28% long-term capital gains rates, not the standard 15% or 20% rate for stocks.
How GLD and IAU differ in practice
GLD launched in 2004 and holds roughly 30 million ounces of gold across multiple vaults. IAU launched in 2005 and holds a similar amount. The main operational difference is that GLD's expense ratio is higher (0.40% vs. 0.25%), but GLD's larger size and longer track record mean it typically has tighter bid-ask spreads — the difference between what you pay to buy and what you receive to sell. On a $10,000 purchase, that spread difference might cost you $5 to $15 more with IAU, depending on your broker and market conditions.
Both funds are audited annually, and both publish their vault holdings publicly. Neither fund lends out gold to third parties, so you are not exposed to counterparty risk beyond the fund itself. If you hold either fund in a taxable account, you will owe taxes on gains at the collectibles rate (28% federal long-term capital gains), not the standard stock rate. This is a significant tax disadvantage compared to holding stocks or bonds, and it is one reason Bogleheads typically keep gold allocations small.
Where Bogleheads typically fit gold into a portfolio
The Boglehead philosophy does not prescribe a specific gold allocation. Some Bogleheads hold none; others hold 5–10% as a hedge against inflation or currency devaluation. The reasoning is that gold does not produce cash flow (no dividends), does not grow earnings, and moves independently of stocks and bonds — which can reduce overall portfolio volatility during market stress, but at the cost of lower long-term returns.
If you decide to hold gold, the Boglehead approach is to pick one fund (GLD or IAU), decide on a target percentage, and rebalance back to that target once or twice a year. Do not try to time gold prices or chase performance. Do not hold multiple gold ETFs. The goal is simplicity and low costs, not optimization.
Tax implications of holding gold ETFs
Gold ETFs are classified as collectibles by the IRS, not as securities. This means long-term capital gains are taxed at a flat 28% federal rate, regardless of your income bracket. Standard stocks and mutual funds held over one year are taxed at 0%, 15%, or 20% depending on your income. For a $10,000 gain, the difference is roughly $280 in extra federal tax compared to a stock fund.
This tax treatment applies whether you hold GLD, IAU, or any other physical gold ETF. It does not apply to gold mining stocks or gold futures, which are taxed as ordinary securities. If you hold gold in a tax-deferred account (IRA, 401k), the collectibles tax does not apply — you pay ordinary income tax on withdrawals instead. For most Bogleheads, this is another reason to keep gold allocations small and to hold them in tax-deferred space if possible.
GLD vs. IAU: a side-by-side comparison
| Feature | GLD (SPDR Gold Shares) | IAU (iShares Gold Trust) |
|---|---|---|
| Expense Ratio | 0.40% annually | 0.25% annually |
| Assets Under Management | ~$60+ billion | ~$30+ billion |
| Bid-Ask Spread | Typically tighter (lower cost to trade) | Typically wider (higher cost to trade) |
| Minimum Investment | One share (price varies with gold) | One share (price varies with gold) |
| Vault Locations | Multiple (London, New York, others) | Multiple (London, New York, others) |
| Boglehead Consensus | Preferred for larger accounts due to spreads | Preferred for smaller accounts or fee-conscious investors |
How to decide between GLD and IAU
Start by checking your brokerage's trading costs. Some brokerages charge a commission per trade; others do not. If your broker charges a flat commission (say, $5 per trade), that cost matters more than the 0.15% difference in expense ratios. If your broker offers commission-free trading on both funds, the lower expense ratio of IAU becomes the deciding factor.
Next, consider your account size and how often you plan to rebalance. If you hold $50,000 or more in gold, the tighter spreads of GLD will likely save you money over time. If you hold $10,000 or less, the lower expense ratio of IAU may be the better choice. For most Bogleheads, the difference is small enough that either fund will work — pick one and stick with it.
Do not switch between GLD and IAU based on short-term performance or price movements. Both funds track the same underlying asset (gold), so performance differences are minimal and driven by expense ratios and spreads, not by fund quality. Once you own one, hold it as part of your long-term allocation.
Frequently Asked Questions
Can I hold both GLD and IAU in the same portfolio?
Technically yes, but Bogleheads typically avoid it. Holding both adds complexity and trading costs without any benefit — they track the same asset and charge different fees. Pick one and use it as your sole gold holding.
Is physical gold better than a gold ETF?
Physical gold requires secure storage, insurance, and makes rebalancing difficult. Gold ETFs handle storage and insurance for you and allow you to buy or sell in seconds. For a Boglehead portfolio, ETFs are simpler and cheaper.
What about gold mining stocks or gold futures instead of GLD or IAU?
Gold mining stocks and futures track gold price movements but add company-specific risk and volatility. They are also taxed as ordinary securities, not collectibles. If you want pure gold exposure, GLD or IAU is simpler. If you want equity exposure to gold producers, that is a different decision with different tax and risk implications.
Should I hold gold in a regular brokerage account or an IRA?
If possible, hold gold in a tax-deferred account (traditional or Roth IRA) to avoid the 28% collectibles tax. Most IRAs allow GLD and IAU. If your IRA is full or you have excess gold allocation, hold the remainder in a taxable account and accept the higher tax rate.
How much gold should I hold as a Boglehead?
There is no single answer. Some Bogleheads hold zero; others hold 5–10%. The decision depends on your risk tolerance, time horizon, and belief in gold as a hedge. Once you decide on a percentage, set it and rebalance annually rather than chasing price movements.