Many investors are turning to gold as part of their portfolio strategy, due to its multiple advantages: It protects against inflation, it is uncorrelated to stocks, and can increase in value during times of national or global turmoil.
Before selecting an exchange-traded fund (ETF) dedicated to gold, it’s important to carefully evaluate its cost, holdings and prospectus. Below are several ETFs with minimal expenses that provide exposure either directly to physical gold mining operations or public companies with operations mining precious metal.
iShares Gold Miners ETF (IAU)
Gold bullion investing can be an excellent way to diversify your portfolio, but if the hassle of purchasing and shipping physical gold bars and coins is too much for you to bear, ETFs provide exposure to this precious metal without all of its hassle. Experts suggest choosing an ETF with large size to prevent price manipulation while having low expense ratio costs and expenses compared with investing directly.
IShares Gold Trust (IAU) is an ETF that tracks daily price movements of gold. Due to its low fees, this fund is popular among investors looking for protection from stock market declines by diversifying into precious metals. Unfortunately, unlike physical gold bullion sales, selling IAU shares does not result in physical gold bars being delivered back. Investors could also look at SPDR Gold Shares (GLD), another popular ETF that tracks bullion price but which charges higher fees compared to IAU and could impede returns.
iShares Gold Miners ETF (ISM)
iShares Gold Miners ETF provides investors with exposure to gold mining companies without incurring the costs and hassles associated with owning physical bullion. With its low expense ratio and reasonable expenses, this ETF makes for an affordable way to add precious metals exposure into a portfolio.
Newmont Mining, Barrick Gold and Agnico Eagle Mines make up more than 40% of RING’s assets and represent more than 40% of its top three holdings – Newmont Mining, Barrick Gold and Agnico Eagle Mines are poised to deliver additional shareholder returns through capacity expansions, dividend payments, debt repayment and share buybacks.
Mining companies’ profitability depends heavily on the price of gold and other precious metals, so their shares tend to exhibit strong correlations with these metals prices. GDX offers broad global exposure; RING gives investors greater international exposure via holdings in both developed and emerging markets. Furthermore, unlike leveraged ETFs that utilize derivative strategies in order to magnify returns, RING does not employ such strategies to magnify returns.
VanEck Vectors Junior Gold Miners ETF (VGJ)
If you are excited by gold but prefer to avoid dealing with physical metal purchases and storage hassles, this ETF may be for you. The VanEck Vectors Junior Gold Miners ETF (VGJ) is a non-diversified commodity ETF designed to replicate, prior to fees and expenses, the price and yield performance of Market Vectors Global Junior Gold Miners Index – designed to track precious metal mining companies that generate at least half their revenues from gold or silver production or have projects with the potential of producing such revenues when developed.
VGJ was launched in May 2006 and trades on the NYSE Arca. As an investment with high levels of risk, this fund should only be taken on by sophisticated investors who understand it fully. Gold prices tend to increase during periods of financial unpredictability or inflationary pressures and falling interest rates when people lose confidence in yield-generating assets and seek tangible commodities like gold instead.
iShares Physical Gold ETF (IAUM)
Physical gold ETFs offer an easy way to invest in precious metal without the burden of shipping, insuring and storing bars or coins – as well as saving costs associated with futures contracts or leveraged ETFs that track gold prices.
GraniteShares ETF is managed by BlackRock and offers US investors the lowest cost option available to them for investing in physical bullion. Vaults in London and Zurich hold physical bullion which is accounted for daily – investors can check its location, serial number, fineness, gross weight and packing ID on GraniteShares’ website.
All the physical-backed ETFs on this list provide transparent, real-time exposure to gold’s price, though one in particular stands out: VanEck Vectors junior gold miners ETF. As this ETF focuses on smaller mining companies – some which may still be exploring – it offers greater upside potential for investors. Investors should carefully evaluate all associated fees when making their choice as higher fees could reduce long-term returns.