Gold is a popular diversifier in investment portfolios to reduce volatility and risk and to hedge against inflation, currency devaluation, and uncertainty. Here we explore the best gold ETFs to get exposure to the shiny metal for 2022.
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Contents
Introduction – Why Gold?
I wrote a more comprehensive overview of gold recently here so you may want to check that out if you want to dive into the details. If you’ve landed on this page, you probably already know why you want to buy gold. Essentially, gold is uncorrelated to both stocks and bonds, so it inarguably at least provides a short-term diversification benefit to lower portfolio volatility and risk, which can be attractive for the risk-averse investor and/or retiree.
While it’s debatable whether or not gold is a reliable inflation hedge, it does seem to be positively correlated with a declining currency, and can thus be used as a store of value. The metal is also held as a “safe haven” for times of political unrest and instability; it is referred to as the “crisis commodity.” Gold is a major component in many popular lazy portfolios like the All Weather Portfolio, the Golden Butterfly Portfolio, and the Permanent Portfolio.
Remember that gold is an extremely volatile asset; you only need a dash of it in your asset allocation for its intended effect. I’d personally hold gold at no more than 10% of the portfolio.
Let’s explore the best gold ETFs below. With these ETFs being physically backed by gold bullion, they reliably track the price of gold while eliminating uncertainties from futures contracts. Most of these funds below track the same index – the spot price of gold bullion – so it’s probably a good idea to just aim for the lowest expense ratio.
The 7 Best Gold ETFs
Below are the 7 best gold ETFs to capture the shiny metal.
GLD – SPDR Gold Trust
The SPDR Gold Trust (GLD) is the most popular gold ETF out there, with over $78 billion in assets. It is also the oldest fund, founded in 2004. This ETF seeks to track the spot price of gold bullion. Unfortunately it has one of the highest expense ratios on this list at 0.40%. Those trading gold over the short term will likely want to use this fund as it has the highest liquidity.
IAU – iShares Gold Trust
Next in line is the iShares Gold Trust (IAU) with over $32 billion in assets. It also tracks the spot price of gold bullion. This fund was incepted in 2005 and has an expense ratio of 0.25%, considerably cheaper than GLD above.
GLDM – SPDR Gold MiniShares Trust
The SPDR Gold MiniShares Trust (GLDM) is the little brother to their massive GLD. GLDM holds 1/10th the amount of gold per share as GLD. Because of this, its expense ratio is much lower at 0.18%. This fund has over $3.5 billion in assets under management.
SGOL – Aberdeen Standard Physical Gold Shares ETF
The Aberdeen Standard Physical Gold Shares ETF (SGOL) is an even cheaper way to access the same gold index, with an expense ratio of 0.17%. As such, though it’s less popular with a little over $2 billion in assets, SGOL would be a fine replacement for GLD and IAU above to save some on fees.
IAUM – iShares Gold Trust Micro
IAUM is the newer, cheaper little brother to IAU above. iShares launched this fund in mid-2021 and it has quickly amassed over $1.2 billion in assets, likely due to the solid track record from the provider and the lowest fee in this space at 0.15%. Like the larger IAU, IAUM tracks the spot price of gold. IAUM would be my choice out of this list.
UGL – ProShares Ultra Gold
Those desiring leveraged exposure to gold may want to use the ProShares Ultra Gold ETF (UGL), which seeks to provide 2x the daily returns of gold bullion. This fund has roughly $300 million in assets and an expense ratio of 0.95%.
GDX – VanEck Vectors Gold Miners ETF
Another way to achieve pseudo leverage on gold is through gold miners stocks. These are companies that physically mine gold. As such, this is considered “indirect” exposure to gold and tends to be more volatile and unpredictable. Those seeking to invest in gold miners will enjoy the VanEck Vectors Gold Miners ETF (GDX). The fund seeks to track the NYSE Arca Gold Miners Index, a market cap weighted index of gold miners stocks around the world. This ETF has over $18 billion in assets and an expense ratio of 0.52%.
Where to Buy These Gold ETFs
All these gold ETFs are available at any major broker. My choice is M1 Finance. M1 has zero trade commissions and zero account fees, and offers fractional shares, dynamic rebalancing, and a sleek, user-friendly interface and mobile app. I wrote a comprehensive review of M1 Finance here.
Disclosures: None.
Interested in more Lazy Portfolios? See the full list here.
Disclaimer: While I love diving into investing-related data and playing around with backtests, I am in no way a certified expert. I have no formal financial education. I am not a financial advisor, portfolio manager, or accountant. This is not financial advice, investing advice, or tax advice. The information on this website is for informational and recreational purposes only. Investment products discussed (ETFs, mutual funds, etc.) are for illustrative purposes only. It is not a recommendation to buy, sell, or otherwise transact in any of the products mentioned. Do your own due diligence. Past performance does not guarantee future returns. Read my lengthier disclaimer here.
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