Practical Slant On Gold Funds And Mutual Fund Alternatives
I’ve written in the past about specific gold funds of the ETF variety, so I’ll now discuss gold funds from a broader, more generic standpoint. In this “parent” category you’ll find mutual funds that focus on gold by mere selection of gold mining stocks. And I also want to briefly review ETFs, with an emphasis on those that hone in on mining companies rather than the ETFs that more simply track bullion. I put these under the more generic gold funds category rather than lumping them in with perhaps more widely known ETFs that follow the move in metal spot prices.
Gold Funds With Quality Management
With that in mind, I want to initially discuss one of my favorite funds, the U.S. Global Investors Gold and Precious Metals Fund. This trades under USERX. There is a $5,000 initial investment, but I have some other ideas if that is more than you have in mind. This is a very conservative fund that invests only in miners that are producing metal right now, so you don’t take on the risk of exploration. At the same time, of course, you also do not participate in the windfall that occurs when a junior company hits the mother lode. USERX carries an annual expense ratio of 1.5%.
If you’re like me and prefer the tinier companies, there is also the U.S. Global Investors World Precious Minerals Fund, and this trades under UNWPX. This similarly carries a $5,000 price tag and a 1.5% expense ratio annually. Similar to USERX, this mutual fund boasts Frank Holmes as its manager, who won the 2006 “Mining Fund Manager of the Year” award by Mining Journal. Moreover, UNWPX picked up the Lipper Fund Award as the top fund in its category for 2007 and 2008. Relative to USERX, UNWPX places just 80% of assets in producers. It then speculates with the junior resource companies with the remaining 20%.
Gold Funds For Smaller Investments
Admittedly, not everyone will have $5,000 to start, or otherwise may not want to allocate that much to gold funds. For this reason I want to revisit ETFs, such as the Market Vectors Gold Miners ETF, which trades under the GDX symbol and provides exposure to a host of mining companies without the initial capital outlay. GDX is an answer to USERX, and is about 2/3 less expensive. You can buy as little as a single share, so the cost of admission is not an obstacle. If UNWPX was more to your liking, you can substitute the Market Vectors Junior Gold Miners ETF (GDXJ).
Gold Funds Versus “My Fund”
When all is said and done, the simple fact of the matter is that all gold funds have their drawbacks. Whether we’re talking about mutual fund or ETFs, there are unnecessary expenses and liabilities. Whether we’re focused on gold bullion or the companies that produce it, I can beat the return of these funds when invested in identical holdings. And when I’m free to make my own stock picks, my winning trounce these returns.
If interested, I’ve written a companion article on Silver Funds you might like to read.
