Investing your money to get portfolio exposure to the Commodities sector has never been easier thanks to ETFs such as the ETF Securities Physical Platinum ETF (ASX: ETPMPT). However, no matter how easy it seems to be, we think it’s still important to do your own ETF review.
1. What is the ETF Securities ETPMPT used for?
The ETFS ETPMPT ETF provides investors with access to the precious metal of platinum, by seeking to achieve a return equivalent to the movements in the platinum spot price, before fees and expenses.
2. Has it reached scale (FUM)?
As at the end of last month, the ETPMPT ETF had $5.69 million of money invested. With a funds under management (FUM) or ‘market cap’ figure of less than $100 million, it’s important to consider if this ETF is still too small. We say an ETF with more than $100 million invested is typically more sustainable than one with less than $100 million (at least) because if an ETF is too small it may not be sustainable for an ETF issuer, such as ETF Securities. However, there are exceptions to this rule of thumb, especially if the ETF issuer/provider is committed to growing the ETF’s FUM to the point where it becomes profitable.
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3. ETPMPT ETF fees explained
With a yearly management fee of 0.49% charged by ETF Securities, if you invested $2,000 in the ETPMPT ETF for a full year you could expect to pay management fees of around $9.80. This does not include any performance fees earned by the ETF’s manager for doing a good job. For context, the average management fee (MER) of all ETFs covered by Best ETFs Australia on our complete list of ASX ETFs is 0.54% or around $10.80 per $2,000 invested. Keep in mind, small changes in fees can make a big difference after 10 or 20 years.
In addition to a yearly management fee, there are other costs investors must consider, including brokerage and taxes. A specific cost for ETF and mFund investors to consider is the buy-sell spread, which is the slippage or ‘invisible’ cost paid by an investor when he or she buys or sells the ETF. For the ETPMPT ETF, the most recent average monthly buy-sell spread we gathered (April 2020) was 1.68%. Remember, the lower (or ‘tighter’) the buy-sell spread, the better. This buy-sell spread was above the average ETF spread of 0.51%, which means the ETPMPT ETF has more slippage than the average ETF (that’s a bad thing).
What to do now
Before testing the water with both feet or diving straight into buying the ETPMPT ETF, please read the ETF’s Product Disclosure Statement (PDS). Also, be sure to take a look at our ETF Securities ETPMPT report. While you’re on our website, use our complete list of ASX ETFs to search for a few different ETFs in the sector and conduct a side-by-side comparison using everything you’ve learned here.
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