Christian Magoon: Gold fund investors will be happy to know that some pricing discounts in the space are so appealing that they match the fabled “employee discount.” Employee discounts are the deals that employees of companies get to purchase goods and services at prices often close to cost. Some companies have taken that discount even further. For example one of my favorite food chains, Qdoba Mexican Grill, recently launched a promotion allowing customers to receive the “employee discount” of 30% on select entrees. What a deal! Here’s an example of the promotion below.
Can gold fund investors get 30% off their gold fund costs? YES, read on.
The great news for gold fund investors is that anyone can receive an “employee like discount” in the gold fund space without becoming an employee of an ETF Sponsor. (By the way, in my experience employees of ETF firms do not receive an employee discount when investing in their firm’s ETFs.) So where are these gold fund bargains? Let’s take a look.
PHYSICAL GOLD FUND DISCOUNT
The largest gold fund in the world is the SPDR Gold Trust (NYSEARCA:GLD). This ETF holds gold bars to back the shares of the ETF traded on the exchange. GLD charges investors 40bps a year to do this. The second largest gold fund in the world is the iShares Gold Trust (NYSEARCA:IAU). Like GLD, it owns bars of gold which backs its shares. The difference is that IAU has been aggressively priced at 25bps a year. This discounted expense ratio for a nearly identical product amount to a cost savings of over 35%. That’s a material amount of cost savings. Here’s a close up the ETFs’ expense ratios and returns from the gold fund list at GoldETFs.biz.
Two popular gold fund ETFs but with different expense ratios.
Similar gold fund performance numbers exist but we think you can tell the one with the lower expense ratio.
STOCK FOCUSED GOLD FUND DISCOUNT
A similar discount dynamic occurs in the stock focused gold fund space. The largest gold stock ETF is the Market Vectors Gold Miners ETF (NYSEARCA:GDX). GDX tracks an index of gold mining companies that are global and large cap in nature. GDX charges 53bps per year. The second largest gold stock ETF is the Market Vectors Junior Gold Miners ETF (NYSEARCA:GDXJ). The fund tracks a global index of small cap gold mining companies. GDXJ charges investors 54bps per year.
Competing alongside these two multi-billion dollar funds is the new to market iShares MSCI Global Gold Miners Fund (RING). RING tracks a global index of gold miners that are predominately large cap. The major difference is that RING charges investors just 39bps. This expense ratio difference represents a 25% savings to investors which is worthy of “employee discount” status. Here’s the list of all gold stock ETFs sorted by expense ratio.
Gold fund ETFs focused on gold stocks have discounts too.
Gold fund investors aren’t the only group that can find discounts of 20 – 35% on similar ETFs. These values abound throughout the competitive and ever changing ETF space. That is why it pays to do research on sites like GoldETFs.biz and the many other great ETF resources available.
Christian Magoon is Publisher of GoldETFs.biz and IndiaETFs.com. He is also CEO of Magoon Capital, a strategic consultant firm to asset managers. Christian Magoon is an ETF insider, having launched over 40 ETFs in the United States to date. A widely recognized thought leader on finance and market issues, Christian regularly contributes to many financial media outlets. Prior to forming Magoon Capital in 2010, Christian was President of Claymore Securities (now Guggenheim Investments), where he built one of the fastest growing and most innovative ETF businesses in the country, gathering more than $3 billion in AUM in three years. He launched more than 40 ETFs, introducing many “firsts” to the U.S. market, including the first Frontier Markets, Sector Rotation, Solar Energy, Timber, BRIC and suite of China focused ETFs. Christian consistently provides his industry insights and knowledge as a commentator in the U.S. media speaking publicly on macro investment issues and ETF related topics. Follow him on Twitter @ChristianMagoon. In 2008, he was named by Institutional Investor News as one of the five people to watch in the U.S. ETF marketplace. In 2011, Financial Planning magazine dubbed Christian an “ETF Pioneer.”