By Jared Cummans
For the past few decades, gold has been one of the most popular commodities, as there are those who swear by it and others who write it off completely (often going out of their way to do so). Today, gold is widely considered one of the last (if not the last) safe haven investment available, especially with the global economy in general disarray. While physical bullion and futures contracts have long been the only ways to gain gold exposure, the popularity of the exchange traded world has cracked gold investing wide open.
There are now a number of ETFs that allow investors to add gold exposure to their portfolio with ease. But when it comes time to actually make an allocation, many are stuck between all of the options available. Below, we outline the three most popular gold ETFs and which one will fit your investment objectives [see also Why No Investor Should Own GLD].
SPDR Gold Trust (GLD)
Quick Stats (8/1/2012)
- Total Assets: $65 billion
- Average Daily Volume: 7.5 million
- Expense Ratio: 0.40%
- In Depth: GLD Analyst Report and ETFdb Realtime Rating
GLD is not only the largest gold ETF, but also the second-largest ETF in the world (it even briefly surpassed SPY in assets during 2011). If nothing else, its sheer size is arguably its most appealing factor. GLD has been trading since 2004 and tracks physical bullion. It should be noted that there is a fair amount of controversy concerning GLD, as a number of bloggers and investors feel that it is nothing more than a “paper asset” and that there is no actual gold behind the fund. Its price is representative of approximately 1/10th an ounce of gold and the fund comes with a number of advantages. Though it can be used as a part of a long-term strategy, GLD has a very active options market as well as a healthy daily volume, making it ideal for active traders.
GLD is Right for You if: You are an active trader seeking to either speculate on gold’s movements or quickly execute positions in the precious metal.
COMEX Gold Trust (IAU)
Quick Stats (8/1/2012)
- Total Assets: $9.5 billion
- Average Daily Volume: 3.5 million
- Expense Ratio: 0.25%
- In Depth: IAU Analyst Report and ETFdb Realtime Rating
IAU is a very similar fund to GLD in that it tracks physical gold bullion. Each share is representative of approximately 1/100th ounce of gold. But IAU’s real advantage all boils down to its fee superiority. IAU charges 0.15% less than GLD, making it the ideal long term hold. Think that number sounds insignificant? Consider two different million dollar portfolios, one which is wholly invested in GLD and the other doing the same for IAU (obviously a diversification nightmare but stick with me). The GLD portfolio will incur annual expenses of $4,000, while its competitor will shell out only $2,500. That $1,500 difference seems miniscule for just one year, but drag it out over a 30 year investment and the difference between fees amounts to $45,000, or 4.5% of your original investment. Saving yourself a quick 4.5% could have been as simple as buying IAU over GLD.
IAU is Right for You if: You are a long term investor seeking to hold onto your ETF for an extended period of time.
Physical Swiss Gold Shares (SGOL)
Quick Stats (8/1/2012)
- Total Assets: $1.8 billion
- Average Daily Volume: 62,000
- Expense Ratio: 0.39%
- In Depth: SGOL Analyst Report and ETFdb Realtime Rating
SGOL is another popular gold ETF but puts a different spin on physically-backed ETFs. Many investors fear for the safety of their physically-backed ETFs, as they do not trust the vault locations to securely hold their bullion. SGOL holds all of its gold in Switzerland, allowing some of the more paranoid investors to gain peace of mind when making their gold allocation. This ETF began trading in 2009 and quickly gathered assets as gold bugs around the world flocked to its one-of-a-kind strategy. Also note that its expense ratio of 0.39% is curiously one basis point cheaper than the ultra-popular GLD.
SGOL is Right for You if: You are a long term investor who wants a vault location in the secure land of Switzerland.
Disclosure: No positions at time of writing.
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