The gold trade is finally beginning to look like a winner. Having made new highs recently, a rising price of gold is beneficial only to investors that have added exposure to this precious metal in their portfolios. In this article, I’m going to discuss one ETF I think provides investors with the best risk-adjusted returns for this trade.
The Van Eck Vectors Gold Miner ETF (TSX:GDX) is a fund comprised of the highest quality gold producers with operations that span the globe. The level of diversification within this fund is only one reason of many to own this ETF, particular in relation to the very reasonable management expense ratio (MER) charged by this fund.
Owning an ETF like this, tracking the broader sector, helps investors spread mine-specific risk and therefore improves one risk-adjusted returns over time.
Gold mining companies also provide investors with greater leverage to rising gold prices, due to the nature of the gold mining business. Because fixed costs are high, increasing production allows for much higher margins on every additional ounce produced.
Rising gold prices further increase the rise in profitability. The vast majority of this commodity price increase directly hits producers’ bottom line. This ETF is my preferable way to play gold right now and I’d highly recommend those considering gold as an investment to check out this ETF.
Invest wisely, my friends.
