The ETF Securities Physical Gold ETF (ASX: GOLD) is one to watch and in this short article we’ll share arguably the three most important metrics to consider when you’re reviewing an ETF.
How the GOLD ETF could be used in portfolios
The ETFS GOLD ETF provides investors with access to the precious metal of gold, by seeking to achieve a return equivalent to the movements in the gold spot price, before fees and expenses.
GOLD surpasses our minimum level for funds under management
As at the end of last month, the GOLD ETF had $1672.7 million of money invested. Given GOLD’s total funds under management (FUM) figure is over $100 million, the ETF has met our minimum criteria for the total amount of money invested, otherwise known as FUM. We draw the line at $100 million for ETFs in the Commodities sector because we believe that relative to smaller ETFs, achieving this amount of FUM derisks the ETF.
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Watch: the management fees and costs
With a yearly management fee of 0.4% charged by ETF Securities, if you invested $2,000 in the GOLD ETF for a full year you could expect to pay management fees of around $8.00. 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 GOLD ETF, the most recent average monthly buy-sell spread we gathered (April 2020) was 0.09%. Remember, the lower (or ‘tighter’) the buy-sell spread, the better. This buy-sell spread was below the average ETF spread of 0.51%, so that’s a good thing.
If you’re weighing up the GOLD 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 GOLD 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.