Precious Metal Mutual Funds

November 17, 2006 | By | 2 Replies More

If you believe that gold and other precious metals will continue their current bull run for a good while yet but have limited funds to invest then mutual funds specializing in this market could be the answer.

Limited money to invest limits the spread of risk

 

It is not practical to share limited available cash between a number of companies in this or any other sector of the stock market in order to lessen the chances of a catastrophe occurring to one of your few stock picks.

Getting it wrong, even though it may be no fault of your own judgment, will make a significant dent in your nest egg.

There are particular dangers in the precious metal world to be very aware of.

Not least of which is that mines can collapse or flood, operations in foreign countries can be subject to damaging political interference, mining is a labor intensive industry and workers tend to take advantage of good times to demand more money or strike etc etc.

And just maybe the majority of stock market gurus have got it wrong. Gold is not much of a hedge against inflation or a falling dollar if neither happens.

Falling demand in one or more precious metals that are used in industry may mean that annual production creates a large surplus with an obvious result on the producers stock.

Apart from these hazards it is not easy to pick out just one or two stocks for your dollar unless you have specialized knowledge of the sector.

Many of those that profess to be experts seem to be more intent on selling their self-professed expertise to investors than putting their own money where their mouths are.

Mutual Funds, also known as Unit Trusts in the UK and elsewhere, are managed by professionals who have expertise in their markets.

Most importantly there is an element of insurance against their mistakes, and be assured they do make them, simply because of the large amount of funds that they administer allows them to spread their investments across a very wide range of companies.

If a mining disaster occurs or a cheaper substitute is found for a precious metal in manufacturing, the resultant loss need not make much more than a barely noticeable impact on the value of the fund.

There is one more point that should be taken on board and that is annual management fee

Invest directly into stocks and there are no on costs, just brokerage to pay when you buy or sell.

Always check out the fees and conditions of any mutual fund you are considering buying into and compare with others.

If it has an outstanding record then it may be worth paying out more for that extra management expertise.

So you confident that there is a profit to make by being in the precious metal market and you like the idea of going the mutual fund route for safety so which one do you choose?

If you look at the records of the funds listed below you will find that last year’s top performer may not have done so well this year.

Consistency is the key

We believe that a fund that has been in the top quartile for the past few years but has not had a stellar performance in any year is a better haven for hard earned investment money than one years high flier that has crashed to earth with a bang the following year.

That is only our opinion and this list is neither comprehensive nor should be construed as being in any way preferential.

Use it as a starting place for becoming familiar with precious metal specialized funds and what each has to offer.

 

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Comments (2)

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  1. Scott Pil;cher says:

    Sir/ Madam;

    Are there precious metal mutual funds that pay either monthly or quarterly dividends?

    Thank you for your time and information.

    Scott Pilcher

    • Hi Scott
      Yes, there are mutual funds in the precious metal sector that pay dividends.

      They mainly target miners that pay dividends, as I am sure that you are aware there is no income derived from holding the physical metals, only profit and/or losses by dealing.

      The easiest way for you to find a comprehensive list of divi paying precious metal mutual funds is by searching Google.

      Just enter “dividend paying precious metal mutual funds” or similar and research those funds that appeal to your investment criteria.

      If you want to diversify some of your funds out of the US dollar go the same route by substituting “Unit Trusts” and find sterling and other currency denominated funds.

      You should consider reinvesting any dividends back into the fund rather than take the cash.

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