Most mutual funds in the Precious Metals category invest primarily in mining company stocks. However, some do own small amounts of gold, silver, copper or platinum, usually in the form of bullion coins. Precious-metals companies are typically based in North America, Australia, or South Africa.
Some investors prefer to buy precious metals, such as gold, silver, platinum and copper, in the physical form of bullion coins. Others prefer to buy shares of mining company stocks or mutual funds, ETFs and ETNs.
Commodities precious-metals portfolios invest in precious metals such as gold, silver, copper, platinum, and palladium. Investment can be made directly in physical assets or commodity-linked derivative instruments. Most commonly, investors gain the most exposure to precious metals is through a sub-category of commodity-precious metals Exchange-Traded Funds (ETFs).
Investors can also us Exchange-Traded Notes (ETNs). It is important to note that ETNs are debt instruments, like bonds, that do not invest in any asset. Although linked to the performance of a market benchmark, ETNs are not equities or index funds; they combine the qualities of bonds and Exchange Traded Funds (ETFs).
The most common means of buying gold is either in bullion gold coins or through a bullion Exchange Traded Fund (ETF) such as the SPDR Gold Shares (GLD). Mutual funds invest little to no assets in physical gold. Usually categorized as "Precious Metals," gold mutual funds typically hold stocks of mining companies. A few of the best gold mutual funds, in terms of long-term performance, long manager tenure and average to low expense ratios include Tocqueville Gold (TGLDX) and Gabelli Gold Load-Waived (GLDAX.LW).
If you want the most direct exposure to silver, you will use a silver Exchange Traded Fund (ETF), such as iShares Silver Trust (SLV). Investors can also use an Exchange Traded Note (ETN), such as UBS E-TRACS CMCI TR Silver ETN (USV), as an alternative. However, it is important to note that ETNs are debt instruments, like bonds, that do not invest in any asset. Although linked to the performance of a market benchmark, ETNs are not equities or index funds; they combine the qualities of bonds and Exchange Traded Funds (ETFs).
If you want the most direct exposure to copper, you will use a type of Exchange Traded Note (ETN), such as iPath DJ-UBS Copper Total Return Sub-Index ETN (JJC).
If you want the most direct exposure to platinum, you will use a type of Exchange Traded Note (ETN), such as UBS E-TRACS Long Platinum Total Return ETN (PTM).
Investor Caution & Note: Precious Metals funds are specialty sectors that are not diversified and must be used in small amounts. For example, you may try limiting exposure to a percentage of 5% (but no more than 10%) of your total investment portfolio. Most mutual funds do not hold platinum as a physical asset. Investors can get indirect exposure to platinum in mutual funds by holding equity precious metals funds, such as Vanguard Precious Metals & Mining (VGPMX) and USAA Precious Metals & Minerals (USAGX) but these will typically have more exposure to gold and gold mining companies than platinum and platinum mining companies.
Disclaimer: The information on this site is provided for discussion purposes only, and should not be misconstrued as investment advice. Under no circumstances does this information represent a recommendation to buy or sell securities.