The negative points
This fund undoubtedly has some negative points too.
Firstly, it has a high management fee of 1.09%, which may be unacceptable to some investors. Although this is the case, the main reason why I still like it is due to it’s high dividend, which pretty much makes up for this hefty fee.
Secondly, one must note its underperformance as compared to the price of Gold over the past few years. Most would expect its price to follow the price of gold, but due to the underperformance of miners mainly due to rising mining costs, the fund does not track the price of gold well, although it does somewhat follow the general trend of gold. This can be seen through comparing the Gamco Global Gold Ntrl Rsrcs&Incm Tr BY (NYSEMKT:GGN) and SPDR Gold ETF charts, as shown below. SPDR Gold is an ETF that tracks the price of gold, and it does that very well, so its price movements can be taken for that of gold’s.
This chart is courtesy of stockcharts.com. Note that dividends were not factored in
This fund, with its high yield and heavy exposure to gold miners, can serve as a great fund for enterprising gold investors, but please fully understand the risks before making any purchase, especially with such a fund that can be deemed to be of higher risk.
The article A 13.5% Payer That Will Feed Any Portfolio Well originally appeared on Fool.com and is written by Ong Kang.
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