Gold — there’s no other asset class more polarizing than this precious metal. Investors either love it or think it’s an absolute waste. Retirement investors, however, may want to think about moving into the first camp.
For starters, “safe haven” and gold, pretty much go hand-in-hand. The precious metal traditionally acts as a form of protection during times of global distress. When global stock markets hit rough waters, the yellow metal tends to move in the opposite direction.
That diversification status will come in handy for retirement investors looking to protect and hedge a portion of their portfolio when the next disaster comes and there’s less time to recoup the losses.
Secondly, it acts as an inflation hedge. During periods of high inflation, gold has historically soared in price. For example, during the 1970’s — when interest rates and inflation here in the U.S. were going crazy — it had its biggest rally ever. Inflation continues to be a silent portfolio killer that investors need to protect themselves from.
Adding those main reasons to growing central bank buying, protection from negative interest rates and various supply/demand constraints, it’s easy to see why retirement investors would want to get their hands on the yellow stuff.
With that in mind, here’s one mining stock, one ETF and one mutual fund to buy.
Gold Stocks for Retirement: Newmont Mining Corp (NEM)
Metal miners could be a great bet for retirement investors. For one thing, their relatively stable fixed-cost structure allows them to realize a larger bump in earnings versus the rise in gold prices.
Secondly — and this is good one for investors — many of the largest miners pay a dividend. And you can’t get much bigger than Newmont Mining Corp (NYSE:NEM).
NEM is the second-largest producer of gold in world. Its portfolio covers 12 mega-mines and projects across five continents. The real beauty is that its immense size allows NEM to reap plenty of cost savings and efficacies throughout its operations. As a result, the miner has one of the lowest all-in cash costs of production.
The difference between this all-in cost and the current price is basically a miner’s profits. In the case of NEM, its dividend potential.
Newmont has linked its dividend payout with the price of gold. That means that rising prices equals a higher payout. Right now, that payout isn’t anything to write home about. However, NEM has yielded more than 3% in the past as the metal gained.
For retirement investors, the steadiness of the large miner and the potential to gain some valuable dividends makes NEM a buy.
Gold Stocks for Retirement: iShares Gold Trust (IAU)
Let’s face facts, buying physical bullion can be difficult and costly for the average investor. Having physical gold bars in a safe is useless if you’re not looking to protect yourself from the next zombie apocalypse and are just looking for inflation/downside protection,
The iShares Gold Trust(ETF) (NYSEARCA:IAU), is far from useless for those retirement investors, however. IAU is what’s known as a physically backed exchange-traded fund. That is, each share is backed by one one-hundredth of an ounce stored on behalf of investors in a vault.
The really beauty for investors is that this ETF makes owning the precious metal beyond simple. Buy one hundred shares and you have one ounce of the precious metal in your portfolio.
Owning gold is as easy as placing a trade. Better still, there’s no need to find a broker or dealer when you need/want to sell. Heck, there are even some brokerage firms that will allow you to trade the IAU for free under their commission-free ETF programs.
As for expenses, IAU is actually cheaper than many stock-focused ETFs. The ETF only costs 0.25% in expenses, or about $2.50 per ounce of gold in your portfolio. That’s much cheaper than rival ETF — the SPDR Gold Trust (ETF) (NYSEARCA:GLD).
Gold Stocks for Retirement: Tocqueville Gold Fund (TGLDX)
Why not own both physical gold and miners? With the Tocqueville Gold Fund (MUTF:TGLDX) you can.
The mutual fund is run by John Hathaway and can invest in a variety of precious metals — including gold, silver and platinum — as well as the companies that are engaged in mining or processing.
No more than 20% of its portfolio can be held directly in the metal, however. Currently, about 11% of its portfolio is in physical gold, while Agnico Eagle Mines Ltd (USA) (NYSE:AEM) and Franco Nevada Corp (NYSE:FNV) round out the top stocks.
Hathaway has been a stellar manager and has guided TGLDX to become one of the better performing precious metals funds since its inception in 1998. Keep in mind, that performance has been volatile over its history. But when the markets were going insane during the recession, Hathaway’s guidance helped the fund produce an 86% return in 2009 and 53% return in 2010.
Even in shorter periods — such as the recent Brexit hiccup — the fund did quite well.
Expenses for TGLDX aren’t super cheap at 1.44%. However, that could be a cheap price given its performance during downturns. Investment minimums are low, too — with $1,000 for regular accounts and just $250 for IRAs.
As of this writing, Aaron Levitt was long IAU stock.