Make Money in Gold the Easy Way – via Gold Miners

Exchange-traded funds offer a convenient way to invest in sectors or niches that interest you. If you'd like to add some gold companies to your portfolio, Market Vectors Gold Miners  (NYSE: GDX  ) could save you a lot of trouble. Instead of trying to figure out which companies will perform best, you can use this ETF to invest in lots of them simultaneously.

The basics
ETFs often sport lower expense ratios than their mutual fund cousins. Market Vectors ETF's expense ratio -- its annual fee -- is a relatively low 0.52 %.

This ETF has underperformed  the world market over the past three years, and outperformed it over the past five. As with most investments, of course, we can't expect outstanding performances in every quarter or year. Investors with conviction need to wait for their holdings to deliver.

With a low turnover rate of 9%,  this fund isn't frantically and frequently rejiggering its holdings, as many funds do.

Why gold?
Gold is not everyone's cup of tea, but some investors like to include some in their portfolios for diversification's sake. Some also favor precious metals, as some of them have more utility.

The performances of gold-related companies over the past year were mixed.

For example, New Gold (NYSE: NGD  ) gained 10%, but while its revenue has grown robustly, its earnings haven't kept up. Meanwhile, its cash has been shrinking , its debt and share count have been creeping  up, and its free cash flow has been negative. Management remains bullish, though, saying in a recent conference call, "We feel fortunate to have a fully funded organic growth pipeline that can see our production more than double in the next four and half years."

AuRico Gold (NYSE: AUQ  ) advanced 4%. Like many of its peers, it has been pressured by rising operating costs, and it also lowered its production guidance for a Mexican mine a few months ago. Still, the company has been fine-tuning its focus, shedding some operations in order to add others.

Coeur d'Alene Mines (NYSE: CDE  ) shed 6%. It offers diversity to a precious-metals portfolio segment, as it's more of a silver than gold company, though it mines both. In its last quarter, it reported both sales and average sale prices down for silver as well as gold. CEO Mitchell Krebs has noted, "As we look ahead to 2013, we expect silver and gold production to be consistent with 2011 and 2012 levels."

IAMGOLD (NYSE: IAG  ) sank 26%. It has been volatile lately, partly due to a disappointing earnings report and reduced projections. It's well positioned to make some smart acquisitions, though, and has already made a promising one, expanding its operations in Canada. Bulls also like its moving toward being more of an owner-operator, as that gives it more control over its operating costs, and they like its pile of cash, as well.

The big picture
Demand for gold isn't going away anytime soon. A well-chosen ETF can grant you instant diversification across any industry or group of companies -- and make investing in and profiting from it that much easier.


Read/Post Comments (2) | Recommend This Article (4)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On December 20, 2012, at 12:09 PM, kurtdabear wrote:

    You should follow up with a column on GDXJ, which specializes in jr. mining and exploration companies. While riskier than GDX, it also promises a larger potential pay-off in an environment of rising gold prices and stocks. As with GDX, it spreads the risk vs. selecting individual stocks, which is even more important when investing in "juniors."

  • Report this Comment On December 26, 2012, at 8:04 PM, vaderblue wrote:

    The problem with ETF's. You get the bad with the good.

Add your comment.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2163109, ~/Articles/ArticleHandler.aspx, 10/31/2014 12:00:33 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement