Gold mining funds basically serve as leveraged plays on the precious metal. The mining companies have high fixed costs, but low variable costs. When the price of gold rises above a company’s cost of production, most of the price hike goes to the company’s bottom line. One fund worth considering is the iShares MSCI Global Gold Miners ETF (RING), notes Paul Dykewicz, editor of DividendInvestor.
ETFs provide a way to invest in stocks of gold mining companies. For the adventurous, there are ETFs that aim to earn two to three times the change in indexes of the companies, on both the upside and downside, through leverage. There also are funds that sell short the shares for those who are bearish on the sector.
Most investors should look at funds that either actively invest in gold miners or aim to track an index of the miners. The relative performance of the major ETFs varies over time. An investor interested in profiting from gold mining stocks should buy a basket of the largest and oldest ETFs in the sector.
RING is a fund that seeks to invest in companies that are mainly engaged in the business of gold mining. RING holds a sizable cost advantage over its competitors, according to Morningstar.
The fund has an array of gold mining stocks, but the largest weighting by far is with Newmont Corporation (NEM), consisting of 20.7% of the fund’s portfolio. Other top holdings and their respective percentages of the fund are Agnico Eagle Mines Ltd. (AEM), 13.19%; Barrick Gold Corp. (ABX), 11.24%; and Wheaton Precious Metals Corp. (WPM), 4.50% and Kinross Gold Corp. (KGC), 4.49%.
The fund rose 2.8% in a recent one-month period, 21.3% in the prior three months, 37.6% so far this year, and 61.5% in the past 12 months.
Recommended Action: Buy RING.
