Exchange-traded funds (ETF) like the SPDR Gold Trust (ETF) (NYSEARCA:GLD) have many similarities with regular stocks. However, even though it trades like a stock on the market, an ETF is a security that follows an index, a commodity or a basket of assets, so it has some particularities as an index fund. Because it acts like a stock on the market, but also because of the low cost and tax efficiency, ETFs can represent an interesting investment opportunity.
Owners of ETFs benefit from the diversification of an index and from the possibility to sell short, and purchase at least one share. In addition, an extra advantage is that ETFs owners bear some lower expenses compared to the average mutual fund, because buying and selling ETFs involve the same commission as paid on any regular order.
Speaking of the aforementioned SPDR Gold Trust (ETF) (NYSEARCA:GLD), we can notice that its shares started to fall together with the overall slump of the gold market. The Trust has already hit a new 52-week low near $132 a share.
Insider Monkey discussed recently that due to the fact that the SPDR Gold Trust (ETF) (NYSEARCA:GLD) holds only gold, it can give precious metals-focused investors less diversification than other ETFs in the same arena. The ETF has to cover its expenses by selling gold, and while the expenses stay at a relatively fixed level, any decrease in the price of gold will cause the SPDR Gold Trust (ETF) (NYSEARCA:GLD) to sell a greater quantity of the precious metal to cover expenses. Even though gold is a solid investment during a prototypical down market, investors are driven towards more liquid stocks post-recovery.
With ETFs on the brain, we’ve compiled a list of the 10 most popular ETFs among hedge funds, because it’s crucial for investors to know how the big boys are trading their portfolio holdings. We’ve also discovered a few strategies with market-beating potential by following hedgies, and it’s possible to do so without paying an arm and a leg.
Check out the list: