You don’t need to be a market timer to have a good reason to buy gold funds.
Some investors believe gold prices are low and ready to jump higher, while others believe a stronger U.S. economy, and thus a stronger dollar, will continue to tarnish the precious metal’s allure and push prices even lower.
And then there are long-term investors who don’t try to buy low or sell high — they buy lower and sell higher. In different words, buying on significant declines is smart investing, just as trimming off positions at relative high marks is good portfolio management.
Furthermore, smart investors don’t use gold funds for anything more than a diversification tool, which might mean a portfolio allocation of 5% to 10%.
The 4-year lows and sharp outflows from gold ETFs could point to a steeper and prolonged selloff for gold prices. However, the patient investor who likes to add to their positions on significant declines is shopping for deals now in the best gold funds.
Here are 4 of the best gold funds to buy to take advantage of the recent dip in gold prices.
Best Gold Funds: SPDR Gold Shares (GLD)
SPDR Gold Shares (GLD) is the heaviest traded gold ETF for several reasons. It offers an accessible, cost-efficient, transparent, and liquid means of investing in gold.
The objective of the SPDR Gold Trust is for the shares to reflect the performance of the price of gold bullion, less the Trust’s expenses.
Although investors do not hold physical gold, GLD shares track the spot price of gold because they are backed solely by physical gold bullion held in a vault in London, the world hub of gold bullion trading.
The low expense ratio of 0.4%, or $40 for every $10,000 invested, helps keep GLD’s performance tracking record “good as gold.”
Best Gold Funds: Market Vectors Gold Miners ETF (GDX)
If you want to add exposure to the equity side of gold, you may want to look at an index exchange-traded fund, such as the Market Vectors Gold Miners ETF (GDX).
Before gold-backed ETFs existed, investors could get gold exposure by investing funds that hold positions in gold miners. With GDX, you’ll buy into large-cap mining corporation, such as Goldcorp Inc (G) and Newmont Mining Corp (NEM).
However, investors should think carefully about buying gold equity funds, as opposed to gold funds backed by gold bullion. Investing in gold miners adds a layer of market risk because the miners have operating costs and capital expenditures that can place extra drag on prices.
With that said, gold funds investing in miners can potentially jump higher and faster in price compared to the spot price of gold — particularly in the short term, when demand and production jumps.
The expense ratio of Market Vectors Gold Miners is 0.53%.
Best Gold Funds: Tocqueville Gold (TGLDX)
If you are looking for an actively-managed mutual fund with broad exposure to gold and potential for high relative long-term capital appreciation, Tocqueville Gold (TGLDX) is an outstanding choice.
The portfolio will invest at least 80% of net assets, plus borrowings for investment purposes, in gold. But the fund can hold other precious metals and it can invest outside of the United States. Most of the fund’s holdings are companies engaged in mining or the processing of gold.
Management employs a bottom-up selection process and seeks companies that are considered undervalued or overlooked in the market.
The performance speaks for itself: Compared to the average precious metals fund, Tocqueville Gold is ranked top 1% (outperforming 99% of the category) for 5-year, 10-year and 15-year returns.
Expenses are 1.34% and the minimum initial investment is $1,000.
As of this writing, Kent Thune did not hold a position in any of the aforementioned securities. Under no circumstances does this information represent a recommendation to buy or sell securities.