{"id":3481,"date":"2025-05-06T19:53:53","date_gmt":"2025-05-06T19:53:53","guid":{"rendered":"http:\/\/blog.valuengine.com\/?p=3481"},"modified":"2025-05-06T21:33:11","modified_gmt":"2025-05-06T21:33:11","slug":"back-to-investing-basics-managing-costs","status":"publish","type":"post","link":"http:\/\/blog.valuengine.com\/index.php\/back-to-investing-basics-managing-costs\/","title":{"rendered":"Back to Investing Basics – Managing Costs"},"content":{"rendered":"

The first 100 days of Trump 2.0 have been anything but \u201cbusiness as usual.\u201d\u00a0 During the past several weeks with tariff wars and Administration policy changes taking center stage, huge volatility swings in both directions have greatly disturbed many investors.\u00a0 Seemingly, there has seldom been a better time to be a volatility trader.<\/p>\n

All 5,200+ stocks US and Canadian stocks, 16 sector groups, 200+ industries, and 700+\u00a0 ETFs have been updated:<\/strong><\/p>\n

Two-week free trial:\u00a0www.ValuEngine.com<\/a><\/strong><\/p>\n

All this may sound like a warning to \u201chead for the hills.\u201d Most investment strategists and financial advisors have been urging investors not to react to this disturbing volatility by heading for the exits with their stocks. I agree. \u00a0That is called selling at the bottom and leaving a bank account with no hedge against inflation and avoiding the best way for most Americans to grow assets.\u00a0 Armageddon is a sucker\u2019s bet.\u00a0 Whether or not there is a recession and whether or not the US dollar and related capital markets continue to fall, the entire US economy is extremely unlikely to fail.\u00a0 There is every reason to believe that the US capital infrastructure is resilient.<\/p>\n

The most likely scenario by far is that we are currently stuck in a downward market cycle of indefinite length.\u00a0 Other feared factors now include such things as stagflation and recession might exacerbate the length and depth of a market.\u00a0 These things are cyclical and will eventually reverse. Therein lies the rub<\/p>\n

History has shown that when a bear market starts reversing, investors miss very significant proportions of recovery by missing the first five market trading days.\u00a0 Frequently that 5-day gain has constituted more than 50% of the eventual recovery.\u00a0 The data-driven conclusion is that redeeming all equity exposure and waiting for things to get better is an extremely costly strategy.<\/p>\n

In fact, many financial advisors are concerned that the recent downturn has taken investors significantly away from their strategic allocations.\u00a0 In some cases, an investor trying to maintain a 60% stocks, 40% other (Bonds\/cash\/gold) may now be at 50%-50%. In fact, for those who believe that last week\u2019s bounce is the beginning of a recovery, this might be a propitious time to rebalance using ETFs.<\/p>\n

I urge those looking to establish such positions by buying ETFs to avoid paying more money for the same exposures.\u00a0 There are many ETFs, usually older choices, which have substantially higher fees than relative newcomers.\u00a0 When buying new shares, it is important to consider trying to avoid traps such as higher than needed fees.<\/p>\n

My first example refers to buying S&P 500 exposure.\u00a0 The S&P 500 is the most used US equity market benchmark, and three of the four largest ETFs are S&P 500 Index Funds.<\/p>\n

One of the most well-known ETFs for obtaining such exposure is the SPDR\u00ae S&P 500\u00ae ETF Trust sponsored by State Street Global Advisors (SSgA), better known by its ticker symbol SPY.\u00a0 <\/strong>This ETF is an inferior alternative to three other S&P 500 ETFs for two reasons:<\/p>\n

    \n
  1. Its fee is 0.065% (six and one-half basis points) or more higher than the three major alternatives.<\/li>\n
  2. It has an antiquated UIT–style structure that does not allow it to reinvest dividends or to lend its securities, both of which increase total returns. This contributes to a relative annual shortfall in investor return of an average of 0.12% (12 basis points) per year.<\/li>\n<\/ol>\n

    In lieu of buying SPY<\/strong> to gain S&P 500 index exposure, investors should consider one of the three alternatives:<\/p>\n

      \n
    1. iShares S&P 500 ETF \u2013 Ticker Symbol IVV<\/strong><\/li>\n
    2. Vanguard S&P 500 ETF \u2013 Ticker Symbol VOO<\/strong><\/li>\n
    3. SPDR Portfolio S&P 500 ETF \u2013 SPLG<\/strong><\/li>\n<\/ol>\n

      The chart below provides additional insights.<\/p>\n

      Current ValuEngine reports on all covered stocks and ETFS can be viewed\u00a0HERE<\/a><\/strong><\/p>\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n
      Ticker Symbol<\/td>\nVOO<\/strong><\/td>\nSPY<\/strong><\/td>\nIVV<\/strong><\/td>\nSPLG<\/strong><\/td>\n<\/tr>\n
      Name<\/td>\nVanguard S&P 500 ETF<\/td>\nSPDR S&P 500 ETF Trust<\/td>\niShares Core S&P 500 ETF<\/td>\nSPDR Portfolio S&P 500 ETF<\/td>\n<\/tr>\n
      ValuEngine Rating<\/td>\n3<\/strong><\/td>\n3<\/strong><\/td>\n3<\/strong><\/td>\n3<\/strong><\/td>\n<\/tr>\n
      Price<\/td>\n$483.90<\/td>\n\u00a0$526.41<\/td>\n\u00a0$528.67<\/td>\n\u00a0$61.92<\/td>\n<\/tr>\n
      Assets ($Billions)<\/td>\n570.6<\/strong><\/td>\n547.9<\/td>\n536.0<\/td>\n57.2<\/td>\n<\/tr>\n
      Avg. Daily Volume<\/td>\n8,272,862<\/td>\n72,038,727 <\/strong><\/td>\n7,560,604<\/td>\n11,629,032<\/td>\n<\/tr>\n
      YTD Price Change<\/td>\n-9.88%<\/strong><\/td>\n-9.92%<\/td>\n-9.90%<\/td>\n-9.88%<\/strong><\/td>\n<\/tr>\n
      1 Year Returns<\/td>\n6.61%<\/strong><\/td>\n6.50%<\/td>\n6.52%<\/td>\n6.57%<\/td>\n<\/tr>\n
      3 Year Returns<\/td>\n7.96%<\/strong><\/td>\n7.90%<\/td>\n7.95%<\/td>\n7.96%<\/strong><\/td>\n<\/tr>\n
      5 Year Returns<\/td>\n15.28%<\/strong><\/td>\n15.20%<\/td>\n15.26%<\/td>\n15.28%<\/strong><\/td>\n<\/tr>\n
      YTD Fund Flows ($mil.) <\/strong><\/td>\n48,059.66<\/strong><\/td>\n(14,883.07)<\/td>\n12,466.11<\/td>\n10,028.04<\/td>\n<\/tr>\n
      Inception<\/td>\n9\/7\/2010<\/strong><\/td>\n1\/22\/1993<\/td>\n5\/15\/2000<\/td>\n11\/8\/2005<\/td>\n<\/tr>\n
      Expense Ratio<\/td>\n0.03%<\/td>\n0.09%<\/td>\n0.03%<\/td>\n0.02%<\/strong><\/td>\n<\/tr>\n
      \u00a0Annual Dividend Yield %<\/td>\n1.44%<\/strong><\/td>\n1.36%<\/td>\n1.44%<\/strong><\/td>\n1.44%<\/strong><\/td>\n<\/tr>\n
      Issuer<\/td>\nVanguard<\/td>\nState Street<\/td>\nBlackRock, Inc.<\/td>\nState Street<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

      This chart demonstrates the differences in fees and structural execution that has translated to disparate returns and dividend income yields during the past five years. Perhaps the best reflection of these disparities is shown by the row showing the year-to-date fund flows. Given that institutional investors dominate ETF cash flows and that they all have teams of savvy analysts, it is no wonder that the three more efficient and less costly ETFs accumulated positive cash flows while SPY <\/strong>has lost more than $14 billion. In fact, one of the big ETF stories of the year has been how State Street\u2019s original SPDR, SPY<\/strong>, relinquished its 31-year assets-under-management (AUM) crown to Vanguard\u2019s VOO<\/strong>.<\/p>\n

      A similar but easier dichotomy exists for investors desiring midcap exposure.\u00a0 There are only two ETFs based on the S&P Midcap 400 Index.\u00a0 One of them, State Street\u2019s MDY<\/strong>, has the same less efficient trust structure as SPY <\/strong>applied to a different index.\u00a0 The other is iShares Core S&P Mid-Cap ETF (IJH<\/strong>).<\/p>\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n
      <\/td>\nIJH<\/strong><\/td>\nMDY<\/strong><\/td>\n<\/tr>\n
      Name<\/td>\niShares Core S&P Mid-Cap ETF<\/td>\nSPDR S&P Midcap 400 ETF Trust<\/td>\n<\/tr>\n
      Assets<\/td>\n83,214,400,000<\/strong><\/td>\n20,451,600,000<\/td>\n<\/tr>\n
      1 Month Returns<\/td>\n-6.05%<\/strong><\/td>\n-6.11%<\/td>\n<\/tr>\n
      YTD Price Change<\/td>\n-11.63%<\/strong><\/td>\n-11.69%<\/td>\n<\/tr>\n
      1 Year Returns<\/td>\n-1.63%<\/strong><\/td>\n-1.75%<\/td>\n<\/tr>\n
      3 Year Returns<\/td>\n2.97%<\/strong><\/td>\n2.89%<\/td>\n<\/tr>\n
      5 Year Returns<\/td>\n14.36%<\/strong><\/td>\n14.22%<\/td>\n<\/tr>\n
      1 Year FF (mil.)<\/td>\n8,033<\/strong><\/td>\n627<\/td>\n<\/tr>\n
      Inception<\/td>\n5\/22\/2000<\/td>\n5\/4\/1995<\/td>\n<\/tr>\n
      Expense Ratio<\/td>\n0.05%<\/strong><\/td>\n0.24%<\/td>\n<\/tr>\n
      Annual Dividend Yield %<\/td>\n1.53%<\/strong><\/td>\n1.41%<\/td>\n<\/tr>\n
      Issuer<\/td>\nBlackRock, Inc.<\/td>\nState Street<\/td>\n<\/tr>\n
      # of Holdings<\/td>\n400<\/td>\n400<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

      Current ValuEngine reports on all covered stocks and ETFS can be viewed\u00a0HERE<\/a><\/strong><\/p>\n

      Here the expense ratio disparities are even greater.\u00a0 MDY <\/strong>still charges 24 basis points while the more efficient IJH<\/strong> charges just 5 basis points.\u00a0 These differences are reflected in superior fund flows, assets under management, dividend yields and returns for IJH.\u00a0 <\/strong><\/p>\n

      Given ultra-dynamic geopolitical situations, many pundits are stating that this is the best time in decades to diversify equity holdings internationally.\u00a0 There are more than 1,000 passive and active international equity ETFs.\u00a0 To simplify things, I chose comparisons of two single country funds representing two families: iShares and Franklin. The two countries are Japan and Australia.<\/p>\n

      There are huge differences in expense ratios for essentially, albeit not exactly, the same exposures. The 10 largest holdings are identical, and the distribution percentages of the underlying industrial sectors are very close. From my analysis, the exposures are essentially the same but the cost and return differences are huge.\u00a0 Nine basis points (0.09%) for the two Franklin single-country ETFs as compared with 50 basis points (0.50%) ETF.<\/p>\n

      The two Japan ETFs are iShares MSCI Japan (EWJ<\/strong>) and Franklin FTSE Japan (FLJP<\/strong>).\u00a0 Here is a side-by-side comparison:<\/p>\n

       <\/p>\n

      Current ValuEngine reports on all covered stocks and ETFS can be viewed\u00a0HERE<\/a><\/strong><\/p>\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n
      Symbol<\/td>\nEWJ<\/strong><\/td>\nFLJP<\/strong><\/td>\n<\/tr>\n
      Name<\/td>\niShares MSCI Japan ETF<\/td>\nFranklin FTSE Japan ETF<\/td>\n<\/tr>\n
      Asset Class<\/td>\nEquity<\/td>\nEquity<\/td>\n<\/tr>\n
      Assets<\/td>\n\u00a0$13,822,000,000.00 <\/strong><\/td>\n$1,978,400,000<\/td>\n<\/tr>\n
      Avg. Daily Volume<\/td>\n5,408,551.00 <\/strong><\/td>\n850,817<\/td>\n<\/tr>\n
      Price<\/td>\n67.92<\/td>\n$29.25<\/td>\n<\/tr>\n
      1 Month Returns<\/td>\n-4.77%<\/td>\n-4.10%<\/strong><\/td>\n<\/tr>\n
      YTD Price Change<\/td>\n1.22%<\/td>\n2.24%<\/strong><\/td>\n<\/tr>\n
      1 Year Returns<\/td>\n4.51%<\/td>\n5.49%<\/strong><\/td>\n<\/tr>\n
      3 Year Returns<\/td>\n7.22%<\/td>\n7.93%<\/strong><\/td>\n<\/tr>\n
      5 Year Returns<\/td>\n8.18%<\/td>\n8.66%<\/strong><\/td>\n<\/tr>\n
      YTD FF ($Mil.)<\/td>\n\u00a0$424.64<\/td>\n$26.60<\/td>\n<\/tr>\n
      Inception<\/td>\n3\/12\/1996<\/td>\n11\/2\/2017<\/td>\n<\/tr>\n
      Expense Ratio<\/strong><\/td>\n0.50%<\/td>\n0.09%<\/strong><\/td>\n<\/tr>\n
      \u00a0Annual Dividend Yield %<\/td>\n2.32%<\/td>\n4.46%<\/strong><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

       <\/p>\n

      Although EWJ <\/strong>continues to dwarf FLJP <\/strong>on assets under management, trading volume and net fund flows, FLJP <\/strong>has been far more beneficial to its owners with higher returns in all periods and a dividend yield that is close to double that of JPY.\u00a0 <\/strong>With FLJP <\/strong>now approaching the $2 Billion threshold in AUM (Assets Under Management) and with a track record this stark and an expense ratio difference where investors pay more than five times more for JPY<\/strong>, I would be very surprised not to see FLJP <\/strong>reach the $10 billion mark much more quickly than the time it took them to get to $2 billion.<\/p>\n

      In Australia, the comparison is not quite so stark.\u00a0 The two ETFs in question here are the iShares MSCI-Australia ETF (EWA) <\/strong>and the Franklin FTSE Australia ETF (FLAU<\/strong>).<\/p>\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n
      Symbol<\/td>\nEWA<\/strong><\/td>\nFLAU<\/strong><\/td>\n<\/tr>\n
      Name<\/td>\niShares MSCI-Australia ETF<\/td>\nFranklin FTSE Australia ETF<\/td>\n<\/tr>\n
      Asset Class<\/td>\nEquity<\/td>\nEquity<\/td>\n<\/tr>\n
      Assets<\/td>\n$1,443,020,000 <\/strong><\/td>\n$51,430,000<\/td>\n<\/tr>\n
      Avg. Daily Volume<\/td>\n2,246,138<\/strong><\/td>\n12,167<\/td>\n<\/tr>\n
      Price<\/td>\n$23.48<\/td>\n$27.78<\/td>\n<\/tr>\n
      1 Month Returns<\/td>\n-0.21%<\/td>\n-0.15%<\/strong><\/td>\n<\/tr>\n
      YTD Price Change<\/td>\n-1.59%<\/td>\n-0.87%<\/strong><\/td>\n<\/tr>\n
      1 Year Returns<\/td>\n4.17%<\/td>\n4.86%<\/strong><\/td>\n<\/tr>\n
      3 Year Returns<\/td>\n-0.28%<\/td>\n-0.15%<\/strong><\/td>\n<\/tr>\n
      5 Year Returns<\/td>\n11.98%<\/td>\n12.44%<\/strong><\/td>\n<\/tr>\n
      YTD FF ($Mil.)<\/td>\n$27.49 <\/strong><\/td>\n$0.06<\/td>\n<\/tr>\n
      Inception<\/td>\n3\/12\/1996<\/td>\n11\/2\/2017<\/td>\n<\/tr>\n
      Expense Ratio<\/strong><\/td>\n0.50%<\/td>\n0.09%<\/strong><\/td>\n<\/tr>\n
      Annual Dividend Yield %<\/td>\n3.75%<\/strong><\/td>\n3.40%<\/td>\n<\/tr>\n
      <\/td>\n\u00a0<\/strong><\/td>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

      Current ValuEngine reports on all covered stocks and ETFS can be viewed\u00a0HERE<\/a><\/strong><\/p>\n

      The fee differentials are still identical by a multiplier of 5.\u00a0 FLAU<\/strong>\u2019s historical return numbers are all higher than those of EWA <\/strong>but here the difference is much smaller.\u00a0 The largest differential in EWA\u2019s <\/strong>favor is dividend yield because it has a slight edge here.\u00a0 An even more daunting disadvantage for FLAU<\/strong> is that in more than seven years, it has only garnered $50 million in assets.\u00a0 That is well below the minimum threshold needed to be considered by many institutional investors and brokerage house platforms.\u00a0 My experience has been that a threshold of at least $100 million must be crossed for brokerage platforms.\u00a0 That number generally goes up to $1 billion or more for retirement systems and other institutional investors.<\/p>\n

      Leaving equities, we get to the most relevant comparisons of all for most investors: gold. Technically, \u201cGold ETFs\u201d are not Exchange Traded Funds (ETFs) at all because there is no actual mutual fund involved.\u00a0 They are actually exchange-traded trusts of an ilk known as \u201cgrantor\u201d trusts.\u00a0 This has tax implications as the IRS regards grantor trusts as a pass-through structure.\u00a0 However, the term Gold ETF has garnered public acceptance because the creation and redemption mechanism which is identical has become known as \u201cthe ETF wrapper.\u201d\u00a0 .<\/p>\n

      The differences between an actual ETF where the \u201cF\u201d stands for fund and a trust using \u201cthe ETF wrapper\u201d has tax implications. \u00a0Shareholders are taxed as if they owned the underlying trust contents.\u00a0 In this case, it turns out that gold is taxed as a collectible which may be taxed at a higher rate than ordinary capital gains on stocks.\u00a0 This is a nuance that can be very costly to high-net-worth investors if they are caught unaware.<\/p>\n

      Most investors are now aware that since January 1, 2025, the annualized total return of gold has exceeded that of the S&P 500 index.\u00a0 Gold has historically had its strongest performing years when investors lose confidence in the integrity of the US stock market and\/or the safety of the US dollar.\u00a0 Thus far, this has been a year in which both factors have come into play.<\/p>\n

      Several major firms\u2019 strategists believe that gold has only begun to shine in 2025.\u00a0 In VanEck\u2019s latest strategy piece, CEO Jan Van Eck published this chart to show gold\u2019s dominance over all other asset classes in the past 12 months.\u00a0 Mr. Van Eck notes, \u201cGold continues to benefit from de-dollarization. Central bank accumulation, defense uncertainty in Europe and tariff policy volatility are driving demand for an alternative to the U.S. dollar.\u201d<\/p>\n

      \"\"<\/p>\n

      The opposite side of the coin, Van Eck notes, is that gold is priced near its historic highs right now and may be due for at least a short-term retracement.\u00a0 Nevertheless, \u201cGold ETFs\u201d have been one of the highest positive inflow categories among ETFs and there are still many investors and traders that advocate adding to current positions.<\/p>\n

      All US ETFs offering non-hedged and non-income-augmented\u00a0 (\u201cplain vanilla\u201d) exposure to gold are structurally identical.\u00a0 They are all grantor trusts.\u00a0 They all hold depository receipts representing pro rata portions of gold held in secure institutional bank vaults.\u00a0 \u00a0Yet even though what the shareholder receives is identical, the expense ratios of gold ETFs are far from identical.<\/p>\n

      The six largest gold ETFs listed on US exchanges are:<\/p>\n

        \n
      1. SPDR Gold Shares (GLD<\/strong>)<\/li>\n
      2. iShares Gold Trust (IAU<\/strong>)<\/li>\n
      3. SPDR Gold Minishares Trust of Beneficial Interest (GLDM<\/strong>)<\/li>\n
      4. abrdn Physical Gold Shares ETF (SGOL<\/strong>)<\/li>\n
      5. GraniteShares Gold Trust (BAR<\/strong>)<\/li>\n
      6. iShares Gold Trust Micro ETF of Beneficial Interest (IAUM<\/strong>)<\/li>\n<\/ol>\n

        Current ValuEngine reports on all covered stocks and ETFS can be viewed\u00a0HERE<\/a><\/strong><\/p>\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n
        Symbol<\/td>\nGLD<\/strong><\/td>\nIAU<\/strong><\/td>\nGLDM<\/strong><\/td>\nSGOL<\/strong><\/td>\nBAR<\/strong><\/td>\nIAUM<\/strong><\/td>\n<\/tr>\n
        Name<\/td>\nSPDR Gold Shares<\/td>\niShares Gold Trust<\/td>\nSPDR Gold Minishares Trust of Benef. Interest<\/td>\nabrdn Physical Gold Shares ETF<\/td>\nGraniteShares Gold Trust<\/td>\niShares Gold Trust Micro ETF of Benef. Interest<\/td>\n<\/tr>\n
        Assets ($mil)<\/td>\n$100,336,000 <\/strong><\/td>\n$46,421,600<\/td>\n$14,614,500<\/td>\n$5,179,420<\/td>\n$1,133,610<\/td>\n$2,639,420<\/td>\n<\/tr>\n
        Avg. Daily Vol.<\/td>\n11,718,257<\/strong><\/td>\n8,736,862<\/td>\n4,359,414<\/td>\n5,506,716<\/td>\n939,721<\/td>\n2,189,414<\/td>\n<\/tr>\n
        Price<\/td>\n$297.46<\/td>\n$60.86<\/td>\n$63.92<\/td>\n$30.80<\/td>\n$31.82<\/td>\n$32.18<\/td>\n<\/tr>\n
        1 Month Return<\/td>\n3.23%<\/em><\/td>\n3.22%<\/td>\n3.28%<\/td>\n3.29%<\/strong><\/td>\n3.18%<\/td>\n3.24%<\/td>\n<\/tr>\n
        YTD Price Chg.<\/td>\n22.85%<\/em><\/td>\n22.92%<\/td>\n22.95%<\/td>\n22.95%<\/td>\n22.90%<\/td>\n22.97%<\/strong><\/td>\n<\/tr>\n
        1 Year Returns<\/td>\n39.14%<\/em><\/td>\n39.30%<\/td>\n39.56%<\/strong><\/td>\n39.56%<\/strong><\/td>\n39.38%<\/td>\n39.55%<\/td>\n<\/tr>\n
        3 Year Returns<\/td>\n18.91%<\/em><\/td>\n19.08%<\/td>\n19.27%<\/td>\n19.21%<\/td>\n19.15%<\/td>\n19.29%<\/strong><\/td>\n<\/tr>\n
        5 Year Returns<\/td>\n13.37%<\/em><\/td>\n13.56%<\/td>\n13.67%<\/strong><\/td>\n13.64%<\/td>\n13.65%<\/td>\nN\/A<\/td>\n<\/tr>\n
        YTD Fund Flows<\/td>\n$7,101.20<\/td>\n$4,340.94<\/td>\n$2,694.89<\/td>\n$396.86<\/td>\n$59.36<\/td>\n$861.86<\/td>\n<\/tr>\n
        Inception<\/td>\n11\/18\/2004<\/td>\n1\/21\/2005<\/td>\n6\/25\/2018<\/td>\n9\/9\/2009<\/td>\n8\/31\/2017<\/td>\n6\/15\/2021<\/td>\n<\/tr>\n
        ER<\/td>\n0.40%<\/td>\n0.25%<\/td>\n0.10%<\/td>\n0.170%<\/td>\n0.171%<\/td>\n0.09%<\/td>\n<\/tr>\n
        Issuer<\/td>\nWorld Gold Council<\/td>\nBlackRock, Inc.<\/td>\nWorld Gold Council<\/td>\nAbrdn Plc<\/td>\nGraniteShares<\/td>\nBlackRock, Inc.<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

         <\/p>\n

        The ETF still dominating AUM, trading volume and fund inflows is the original SPDR Gold Shares (GLD) <\/strong>launched in 2004.\u00a0 In fact, GLD <\/strong>is often referenced as a \u201cgeneric name\u201d for the category somewhat akin to saying \u201cCoke\u201d when referring to any cola drink.\u00a0 When a new customer tells most personal advisors that they want to buy gold shares, more times than not he or she has bought shares of GLD.\u00a0 <\/strong><\/p>\n

        I have a strong opinion that the client is ill-served with new shares of GLD <\/strong>at this time.\u00a0 The only possible exception I can think of is if the client wishes to pursue a buy-write strategy selling covered calls given that the calls of GLD <\/strong>are the most liquid by far. Other than that, I counsel looking more closely at alternatives other than IAU <\/strong>(another older and overpriced ETF) listed above.<\/p>\n

        SGOL <\/strong>and BAR <\/strong>were the lowest cost ETFs when launched but the SPDR Gold Minishares Trust (GLDM<\/strong>) of Beneficial Interest then took the title when launch in 2018 at an expense ratio of just 10 basis points (0.10%).\u00a0 Three years later, iShares decided to trump GLDM <\/strong>by 1 basis point, issuing the iShares Gold Trust Micro ETF of Beneficial Interest (IAUM) <\/strong>at an expense ratio of 9 basis points (0.09%).<\/p>\n

        For most investors, all you need to know is that when you purchase $10,000 worth of shares of any of the six exchange-traded trusts above, that $10,000 of your overall investment portfolio is now allocated to gold.\u00a0 In the interests of full disclosure, There are some minor structural differences.\u00a0 The underlying assets in SDOG <\/strong>and BAR <\/strong>are 100% gold in a vault, allowing for less than 1% allocation to cash for \u201crounding purposes\u201d in efficient share pricing.\u00a0 The underlying assets in the other four may be, at times, as much as 20% in swaps, futures and cash.\u00a0 Apparently, there are some people who sleep better at night knowing their \u201cshares of gold\u201d are 100% backed by bullion rather than 80% backed.\u00a0 The structural differences between GLD <\/strong>shares and GLDM \u201c<\/strong>mini-shares\u201d are even more inconsequential.\u00a0 They are held at the bank vaults of different custodians and each share of GLD <\/strong>represents 0.01% of a pro rata portion of gold bullion while each share of GLDM <\/strong>represents 0.001% of the same.\u00a0 Those differences are reflected in the per-share stock price of each\u00a0 That relationship is virtually identical for IAU <\/strong>and IAUM.\u00a0 <\/strong>The firms cite reasons why large institutional investors should buy GLD <\/strong>and IAU <\/strong>while some smaller institutions, retail clients and their advisors may prefer the lower-priced GLDM<\/strong> and IAUM<\/strong> respectively.\u00a0 Most investors and advisors reading this article may find those differences less important than the huge fee differentials.<\/p>\n

        In summary, please consider this blog article a reference point for doing your own homework when adding to current positions following market pullbacks or diversifying your asset allocations further using midcap and global equities. Again, the main reason for doing this is that the market has shifted your current asset allocations away from your target levels<\/p>\n

         <\/p>\n

        Financial Advisory Services based on ValuEngine\u2019s research models:<\/strong><\/p>\n

        \u00a0www.ValuEngineCapital.com<\/a><\/strong><\/p>\n

        \u00a0<\/strong><\/p>\n

        Others may feel that his is more than just a cyclical change but a fundamental structure change away from dollar-denominated assets.\u00a0 Those investors may want to assume or add to positions in \u201cgold ETF\u201d trusts.<\/p>\n

        In all these cases, investors should be aware that although the most well-known options (SPY, MDY. IWJ, IWA<\/strong> and most of all GLD<\/strong>) may be inferior from both costs and structural purposes to newer alternatives.\u00a0 Although paying 30 basis points (0.30%) more for \u201cthe brand name\u201d may seem trivial to most investors, if you hold these assets for 20 years or more the compounding of these differentials will amount to real money.<\/p>\n

        Some advisory clients may wish to chat with their advisors about these differentials.\u00a0 Others will focus more on disciplining themselves to stay the course during this market correction which showed potential signs of abatement this week. There may be renewed reason to hope for the best.\u00a0 Thanks for reading.\u00a0 I wish you the best.<\/p>\n

         <\/p>\n

        _______________________________________________________________________________________________<\/p>\n

        By Herbert Blank<\/strong><\/p>\n

        Senior Quantitative Analyst, ValuEngine Inc ( www.ValuEngine.com<\/a> )<\/p>\n

        support@ValuEngine.com<\/a><\/p>\n

        (321) 325-0519<\/p>\n

        All the over 4,200 stocks, 16 sector groups, over 250 industries, and 600 ETFs have been updated on\u00a0www.ValuEngine.com<\/a><\/p>\n

        Financial Advisory Services based on ValuEngine research available through\u00a0ValuEngine Capital Management, LLC<\/a><\/p>\n

        Free Two-Week Trial to all 5,000 plus equities and ETFs covered by ValuEngine\u00a0HERE<\/a><\/p>\n

        Subscribers log in\u00a0HERE<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

        The first 100 days of Trump 2.0 have been anything but \u201cbusiness as usual.\u201d\u00a0 During the past several weeks with tariff wars and Administration policy changes taking center stage, huge volatility swings in both directions have greatly disturbed many investors.\u00a0 Seemingly, there has seldom been a better time to be a volatility trader. All 5,200+ … Read more<\/a><\/p>\n","protected":false},"author":7,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[130,1,39],"tags":[1775,2600,2598,2601,2599,1880,1776,1774,2001,2597,1770,1833,2602,2290,1726,1768],"_links":{"self":[{"href":"http:\/\/blog.valuengine.com\/index.php\/wp-json\/wp\/v2\/posts\/3481"}],"collection":[{"href":"http:\/\/blog.valuengine.com\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"http:\/\/blog.valuengine.com\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"http:\/\/blog.valuengine.com\/index.php\/wp-json\/wp\/v2\/users\/7"}],"replies":[{"embeddable":true,"href":"http:\/\/blog.valuengine.com\/index.php\/wp-json\/wp\/v2\/comments?post=3481"}],"version-history":[{"count":9,"href":"http:\/\/blog.valuengine.com\/index.php\/wp-json\/wp\/v2\/posts\/3481\/revisions"}],"predecessor-version":[{"id":3484,"href":"http:\/\/blog.valuengine.com\/index.php\/wp-json\/wp\/v2\/posts\/3481\/revisions\/3484"}],"wp:attachment":[{"href":"http:\/\/blog.valuengine.com\/index.php\/wp-json\/wp\/v2\/media?parent=3481"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"http:\/\/blog.valuengine.com\/index.php\/wp-json\/wp\/v2\/categories?post=3481"},{"taxonomy":"post_tag","embeddable":true,"href":"http:\/\/blog.valuengine.com\/index.php\/wp-json\/wp\/v2\/tags?post=3481"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}