Investing in gold stocks over the past few years has been tough. It's like crossing the start line intending to run a 10K race, but the course turns out to be the distance of a marathon.
For those who have persevered and pushed through the pain, it's been nothing-but-elation lately as gold companies have seen incredible moves. Over the past three months through March 3, the Philadelphia Gold & Silver Index (XAU) rose an incredible 25 percent, significantly outperforming the S&P 500 Index by about 22 percent.
We're pleased to say that the mutual funds within Morningstar's equity precious metals funds category grew even more in the same time frame, averaging a three-month return of nearly 30 percent.
What's more impressive is that these funds collectively were the best performers among the entire fund universe.
Back in January, we said that gold stocks had reached the historical limits of their multi-year decline. Morningstar also anticipated this rebound. In its annual "Buy the Unloved" strategy that looks at annual flows in and out of equity funds to figure out what's loved and hated by investors, precious metals funds were among the most unloved fund categories.
The strategy suggests investors buy funds from "stock categories with heavy redemptions and sell those with the greatest inflows." Historically, the approach worked well. Assuming a three-year holding period and category average returns, "the unloved funds returned an annualized 10.4 percent versus 6.4 percent for loved," according to the article.
"Of course there's no guarantee those results will repeat, but it does illustrate the value in going against the grain," says Morningstar.
Where will gold stocks go from here? I recently told Palisades Radio that I look forward to gold stocks experiencing a nice, slow move up, so if you haven't been a long distance runner in gold companies, you might not want to miss out on this exciting course.
Two ways to participate are U.S. Global's Gold and Precious Metals Fund (USERX) and World Precious Minerals Fund (UNWPX). Each fund seeks companies that have historically experienced growth on a per share basis and offer potential capital appreciation. We believe this selective approach has helped the funds outperform the indices over the one-year period through February.
Download the USERX fact sheet or UNWPX fact sheet to see long-term performance today and take time to listen to the Palisades Radio conversation to learn more about what's going on with gold miners.
Please consider carefully a fund's investment objectives, risks, charges and expenses. For this and other important information, obtain a fund prospectus by visiting usfunds.com or by calling 1-800-US-FUNDS (1-800-873-8637). Read it carefully before investing. Distributed by U.S. Global Brokerage, Inc.
Past performance does not guarantee future results.
Gold, precious metals, and precious minerals funds may be susceptible to adverse economic, political or regulatory developments due to concentrating in a single theme. The prices of gold, precious metals, and precious minerals are subject to substantial price fluctuations over short periods of time and may be affected by unpredicted international monetary and political policies. We suggest investing no more than 5 percent to 10 percent of your portfolio in these sectors.
All opinions expressed and data provided are subject to change without notice. Some of these opinions may not be appropriate to every investor. By clicking the link above, you will be directed to a third-party website. U.S. Global Investors does not endorse all information supplied by this website and is not responsible for its content. The Philadelphia Stock Exchange Gold and Silver Index (XAU) is a capitalization-weighted index that includes the leading companies involved in the mining of gold and silver. The S&P 500 Stock Index is a widely recognized capitalization-weighted index of 500 common stock prices in U.S. companies.