For investors with a positive view on the price of gold, they may want to consider adding gold stocks to their overall precious metals allocation.
Gold stocks are sensitive to the price of gold because of their inherent operating leverage. As the price of gold rises, it typically translates into higher profits for a gold company. As you can see from the table below, the annual returns from gold stocks have been pronounced relative to the price change of gold.
Gold Bullion vs. Gold Stocks: Annual Total Return Performance (%)
For most investors, we suggest they take a diversified approach when investing in gold stocks because of the company-specific risk when investing in an individual stock. A popular and convenient way to invest in a basket of stocks is through exchange-traded funds or ETFs. Like mutual funds, ETFs provide diversification of holdings but with the added benefits of providing intraday liquidity (the ability to buy and sell throughout the trading day) and lower management fees.
In partnership with ALPS Advisors, Inc. and ALPS Distributors, Inc. Sprott offers two gold mining ETFs: Sprott Gold Miners ETF (NYSE Arca: SGDM) and Sprott Junior Gold Miners ETF (NYSE Arca: SGDJ).
An investor should consider the investment objectives, risks, charges and expenses carefully before investing. Click here to obtain a Sprott Gold Miners ETF Statutory Prospectus and Sprott Junior Gold Miners ETF Statutory Prospectus, which contains this and other information, contact your financial professional or call 888.622.1813. Read the Prospectuses carefully before investing.
The Funds are not suitable for all investors. There are risks involved with investing in ETFs including the loss of money. The Funds are considered non-diversified and can invest a greater portion of assets in securities of individual issuers than a diversified fund. As a result, changes in the market value of a single investment could cause greater fluctuations in share price than would occur in a diversified fund.
Shares are not individually redeemable. Investors buy and sell shares of the Sprott Gold Miners ETF and Sprott Junior Gold Miners ETF on a secondary market. Only market makers or "authorized participants" may trade directly with the Fund, typically in blocks of 50,000 shares.
Funds that emphasize investments in small/mid-cap companies will generally experience greater price volatility. Diversification does not eliminate the risk of experiencing investment losses. ETFs are considered to have continuous liquidity because they allow for an individual to trade throughout the day. A higher portfolio turnover rate may indicate higher transaction costs and may result in higher taxes when Fund shares are held in a taxable account. These costs, which are not reflected in annual fund operating expenses, affect the Fund’s performance.
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