ETFs that invest in precious metals can be a source of comfort to investors when markets are heading south and the economy is passing through choppy weather. This is also a period when they generate higher returns on a consistent basis, even outperforming stocks. A portfolio with the presence of even a small amount of precious metals securities can provide sufficient diversification as well as protection against inflation. ETFs are the brightest choice for investing in this sector since they possess the advantages of loe costs and diversification.
Remember try and choose the ETFs with the lowest expense ratio for its category and more importantly the one that has the highest correlation to the price of precious metals. The following 3 Precious Metals ETFs all track the spot price of the physical metal it represents and is therefore the cleanest way to invest in each precious metal.
SPDR Gold Trust (GLD) is one the largest and most liquid ETFs in the world, it tracks almost 100% the physical price of gold bullion measured in U.S. dollars kept in London. This ETF has one of the lowest expense ratios of any precious metals ETF at 0.40%. Due to the strong demand for Gold recently this ETF is selling at .33% premium to its NAV, which is well above its historical average premium to its NAV.
Ishares Silver Trust (SLV) tries to replicate the spot physical price of Silver. This ETF has a 0.50% expense ratio equal to its category average. This ETF is quite volatile, with almost double the volatility of the Gold ETF. This ETF has almost $13 billion of assets under managament.
Ipath DJ US Copper ETN (JJC) is the only pure play copper ETF in existence, that tracks the actual spot price of the commodity copper. Its expense ratio is 0.75% well above its category average, but there is virtually no other alterntive to owning copper outright other than this ETF. This ETF has $164 assets under management, and is currently selling at a substantial discount to its NAV of -%1.13. This current discount to its NAV is well above the historical average.
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