Exchange-traded funds offer a convenient way to invest in sectors or niches that interest you. If you expect gold companies to thrive as demand for gold keeps growing in the face of a volatile stock market, the Market Vectors Gold Miners ETF (NYS: 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.
ETFs often sport lower expense ratios than their mutual fund cousins. The gold ETF's expense ratio -- its annual fee -- is a relatively low 0.53%.
This ETF has performed well, crushing the S&P 500 over the past five years and especially since late 2008. 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 very low turnover rate of 3%, this fund isn't frantically and frequently rejiggering its holdings, as many funds do.
What's in it?
Several of this ETF's components made strong contributions to its performance over the past year. AuRico Gold (NYS: AUQ) , up 17% so far in 2011, has been firing on all cylinders lately, making major acquisitions and beefing up its production. Well-regardedNewmont Mining (NYS: NEM) , up 12%, offers the intriguing feature of a dividend tied to the spot price of gold. New Gold (ASE: NGD) , also up 12%, has been making some smart deals as it sets itself up for low production costs.
Other companies didn't add as much to the ETF's returns in 2011, but could have an effect in the years to come. Silver Wheaton (NYS: SLW) may have shrunk by about 14%, but it remains compelling, with analysts boosting their expectations recently. My colleague Chris Barker has even dubbed it "the most profitable company in the world." Hecla Mining (NYS: HL) , down 41%, has tied its dividend to the price of silver -- that will be attractive in times of high or rising prices, but less so at other times.
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.
At the time thisarticle was published Longtime Fool contributor Selena Maranjian holds no position in any company mentioned. Click here to see her holdings and a short bio. Motley Fool newsletter services have recommended buying shares of Market Vectors Gold Miners ETF. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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