Precious Metal ETF

By: EconomyWatch   Date: 3 August 2009

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EconomyWatch

The core Content Team our economy, industry, investing and personal finance reference articles.

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A precious metals ETF invests in the stocks of those companies that mine, process or produce precious metals. Precious metals are a good defensive investment for traders to hedge against inflation or recession.

 

Precious Metal ETFs
 

Precious metals are metals that are rare and carry a high economic value. Their high value is driven by their industrial use and status as an investment commodity. Their industrial use varies from ornaments to nuclear weaponry.

 

Precious metals include:

  • Gold

  • Silver

  • Platinum

  • Iridium

  • Rhodium

  • Palladium

 

One can invest in precious metals by purchasing the physical commodity, by investing in futures contracts or by buying the stocks of publicly traded companies that are involved with the research, exploration and processing of these metals.

 

Precious metal ETFs are among the safest options of investing in these companies. These ETFs invest indirectly in such companies by purchasing their stocks. Later these stocks are remarketed in different exchanges as stocks. Investors can thus buy and sell these ETFs anytime.

 

Popular Precious Metal ETFs

 

There are many sector specific precious metal ETFs that invest only in gold or silver processing companies. However, the list below contains the most popular precious metal ETFs that invest in different ratios in these precious metals, globally:

  • ELEMENTS MLCX Precious Metals Plus Index ETN (PMY)

  • iPath Dow Jones-AIG Precious Metals Total Return Sub-Index ETN(JJP)

  • PowerShares DB Precious Metals Fund (DBP)

  • ETFS Leveraged Precious Metals ETF (LPMT-LSE)

  • ETFS Physical PM Basket ETF (PHPM-LSE)

  • ETFS Physical PM Basket Sterling ETF (PHPP-LSE)

  • ETFS Precious Metals ETF (AIGP-LSE)

  • ETFS Short Precious Metals ETF (SPMT-LSE)

 

Advantages of Precious Metal ETFs 

Besides being lucrative, investments in precious metal ETFs have several advantages:

  • A trader doesn’t need to store the bullions with himself, thus compromising his security.

  • Precious metal ETFs have a very nominal management fee.  

Disadvantages of Precious Metal ETFs 

Being an investment in stocks, precious metal ETFs have many disadvantages, such as:

  • Precious metal ETFs can only be redeemed in cash not in the metal itself.

  • Many such ETFs attract heavy taxes in different geographies.

 

Before investing in precious metal ETFs, one must know their portfolio and the various taxes that they might carry.

 Find out more about investing in precious metals for beginners.

 


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Most Popular in Exchange Traded Funds

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