If you’re looking for an ASX ETF in the Commodities sector, chances are, the ETF Securities Precious Metals Basket ETF (ASX: ETPMPM) is an ETF you’re considering.
How Australian investors can use the ETPMPM ETF
The ETFS ETPMPM ETF provides investors with access to the precious metal market, by seeking to achieve a return equivalent to the movements in the spot prices of four precious metals: gold, silver, platinum, and palladium – before fees and expenses.
The ETPMPM ETF is yet to reach scale
As at the end of last month, the ETPMPM ETF had $13.28 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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Don’t forget ETPMPM fees
With a yearly management fee of 0.44% charged by ETF Securities, if you invested $2,000 in the ETPMPM ETF for a full year you could expect to pay management fees of around $8.80. 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 ETPMPM ETF, the most recent average monthly buy-sell spread we gathered (April 2020) was 1.46%. 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 ETPMPM ETF has more slippage than the average ETF (that’s a bad thing).
If you’re weighing up the ETPMPM ETF, keep in mind that this is just a brief introduction to the ETF. Indeed, before doing anything, take a look at our free ETF Securities ETPMPM report. And while you’re at it, consider searching our complete list of ASX ETFs for similar ETFs in the Commodities sector, to do a good comparison.