What IAU actually is

IAU is a trust from iShares that aims to reflect the price of gold, before the trust’s expenses and liabilities. It is not actively managed and does not try to profit from gold’s ups and downs. It is intended as a simple, cost-effective alternative to owning gold directly, which involves assaying, transport, storage and insurance.

It launched in 2005 and competes directly with GLD.

How it works

Instead of holding stocks, the trust holds physical gold. Each share represents a fraction of an ounce of gold (a fraction that shrinks slightly over time as the trust pays its expenses), so the share price follows the gold price, less those expenses.

Distributions

IAU pays no dividend or interest. Gold generates no income, so the only way to gain is for the price of gold to rise, and the only way to get cash out is to sell shares. In some countries gold funds are taxed differently from stock funds. Check the fund’s current yield, fees and distribution schedule on the issuer’s website, because they change.

What to keep in mind

  • No yield. It does not help build dividend income.
  • Volatile. Gold can fall for long stretches.
  • Role in a portfolio. Many investors use it as a hedge in uncertain markets, not as a growth engine.
  • Costs. Fees reduce returns over time, so compare gold funds.

Quick take

IAU is a simple way to own gold, but it is the opposite of an income investment. See how it compares in IAU vs GLD.