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Gold mutual funds are similar in definition to stock mutual funds in that they are a representative sample of gold shares that are put together in a portfolio with the purpose of echoing the overall market. Investors who purchase gold mutual funds hope that by buying shares in groups rather than individually, they will earn more money over the long run. In 2003, South African gold mutual fund expert Dr. Clive Roffey closely monitored the performance of various gold mutual funds as compared to their gold market counterparts. His findings support investor's hopes that gold mutual funds are a solid investment, especially in a bull market. Roffey's study of gold mutual funds can be further explored at http://www.gold-eagle.com/editorials_03/roffey061203.html

Of the ten gold mutual funds he observed (which include Vanguard, Monterey, Oppenheimer and US Global), each fund closely mirrored the performance of the XAU (The Philadelphia Gold and Silver Index) as its value's declined. Typically, the gold mutual funds either slightly stayed above index lows are remained steady during bearish performances. However, as the index values increased, all of the gold mutual funds studied exceeded the values of the index highs. Their prices rose faster and maintained their values for longer periods of time.

Are all gold mutual funds assured winners? Roffey warns that any investment is a risk, but profits from gold mutual funds are bases primarily on what type of risk the investor is willing to take. Gold mutual funds can be classified as aggressive or conservative. Obviously, aggressive gold mutual funds are those that have more risk - these funds can rise and fall sharply, but have the most potential for significant profit. Conservative gold mutual funds, on the other hand, are steady in their performance and will usually provide a lesser profit over a longer period of time.

Currently, gold prices are at an over ten-year high, so investing in gold mutual funds may be a great addition to a financial portfolio that needs a little diversification or change.