I’ll provide a very brief review of popular ETFs, and then discuss alternatives such as a more general bullion fund, as well as the BMG Bullion Fund. Gold Bullion Securities (GOLD) was the first gold ETF on the scene, launching in Australia on March 28, 2003. Today, the United States features GLD, which started in 2004, and IUA, which started in 2005. There’s also GLD in Johannesburg, as well as GBS for both London and Euronext. The Swiss have SWX, and so on. Canada offers something I’ll mention momentarily, but the point is that there is no shortage of gold bullion-based ETF type opportunities no matter where you live. Just know what you’re doing because there are some, such as BULL that trades in London, that isn’t so much about storing bullion as it is making an effort to track its price.
I’ve shared my thoughts about ETFs and why I will not personally invest in them. A gold ETF might not be a bad idea if I had no free time to be more actively involved. Even then, however, I think I’d seek out the guidance of someone who could help me in my investment decisions, so I could take advantage of a more diversified portfolio and enjoy the wild leverage of a thoughtfully-acquired basket of individual stocks. Nevertheless, I understand people will continue to invest in these vehicles en masse, and so I want to share some helpful tidbits of wisdom.
In fact, I know the fact of the matter is that some people may know just enough to invest in metal, and that’s about it. They will not dedicate much of any time to the investments, and may even find it too taxing to seek out a gold ETF, followed by a silver ETF, and look for a way to play platinum to boot. If that sounds like you, I’m not here to beat you up, but rather to help.
Bullion Fund Trumps Alphabet Soup
If all of this mining stuff is not really your passion, like it is mine, no worries. There is such a thing as a more generic bullion fund, which can give you exposure to a swath of precious metals without having to choose between GLD and IAU, only to then be burdened by figuring out whether to go with SLV, SIVR, DBS, USV, or the leveraged AGQ or ZSL… if not SIL! If that’s enough alphabet soup to make your head spin, how about one single, solitary bullion fund that will give you exposure to everything in one fell swoop?
Bullion Fund Based On Weight
If pulling the trigger on one investment makes the most sense to you, I have some good news for you. A highly popular option for pouncing on gold and silver simultaneously is the Central Fund of Canada. It’s based in Calgary, Alberta, Canada, and perhaps more active on the Toronto Exchange, but you can access it on AMEX via ticker CEF. This bullion fund is actually the oldest pure bullion fund, as opposed to more modern ETFs, having been established back in 1961. The fund is required to keep a minimum of 90% of all assets in gold and silver bullion at all times, which is stored by the main Calgary branch of CIBC. Rather than allocating according to price, which can swing wildly as with silver’s summer-fall 2010 increase of 50%, CEF holds a gold to silver ratio of 1:50 based on weight.
Bullion Fund Based On Value
Another option for a generic bullion fund is the actual BMG Bullion Fund. As opposed to the weight proportions used in CEF, Bullion Fund holds equal dollar amounts of metal. This can cause significant reallocation, such as when silver left gold in the dust and rose 50% in a matter of months. However, Bullion Fund also holds platinum, in addition to gold and silver, which gives investors a bite at that apple as well. It also holds a respectable 95% of assets in bullion, and avoids derivatives, futures, options, and so on. Finally, however, if you want to own physical metal in a more straightforward manner, yet not bother with safeguarding it yourself, you can look at buying bullion direct from sources that store precious metal for you as an integral part of their business model.