DB Gold Double Long ETN
DGZ provides monthly inverse exposure to the performance of gold futures contract. The notes index selects contracts based on the shape of the futures curve to minimize contango.
DGZ, unlike most leveraged and inverse products, is designed to provide -1x exposure to its index on a monthly rather than daily basis. Still, the same caution applies: Investors holding it beyond the next reset date will be subject to the effects of compounding a dynamic that can cause the notes performance to drift from its promised -1x exposure. The notes index tracks a single futures contract on gold, determined to be least influenced by contango. The index measures the changes in the price of the gold futures contract, the returns from rolling those contracts over, and the cost of borrowing (collateral) as measured by the 3-month Treasury bill. Structured as an ETN, DGZ carries the counterparty risk of its issuer.
$8.05
Change: ($-0.03) -0.38%Expense Ratio: 0.75%
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Expense Ratios vs Storage Fees
When you invest in gold ETFs, expense ratios are an important consideration. These fees, charged annually, cover the costs associated with managing and operating the fund. They may seem small but can compound over time, reducing your overall returns.
In contrast, physical bullion requires storage fees. These fees ensure your gold is stored safely, typically in a professional vault. Unlike the fluctuating expense ratios of ETFs, storage fees are usually consistent, providing a stable cost structure. Weighing the impact of these fees is essential in deciding the most suitable investment strategy for your goals.
Expense Ratio for DGZ
| Years | Net Investment | ETF Fees 0.75% (avg) | OneGold Storage 0.12% (Gold) | Assumes 8% expected return |
|---|---|---|---|---|
| 1 | $15,000 | $75.00 | $12.00 | Initial Investment = $10,000 |
| 2 | $20,000 | $198.94 | $31.91 | Yearly Investment = $5,000 |
| 3 | $25,000 | $378.84 | $60.90 | |
| 4 | $30,000 | $622.52 | $100.29 | |
| 5 | $35,000 | $938.67 | $151.56 | |
| 6 | $40,000 | $1,336.92 | $216.33 | |
| 7 | $45,000 | $1,827.96 | $296.43 | |
| 8 | $50,000 | $2,423.63 | $393.90 | |
| 9 | $55,000 | $3,137.04 | $510.97 | |
| 10 | $60,000 | $3,982.69 | $650.14 | |
| 20 | $110,000 | $24,212.80 | $4,043.72 |
When evaluating the DGZ Gold ETF against OneGold, it is essential to account for both fees and the overall investment impact over time. This analysis will cover a 20-year period, using an 8% expected return rate, which aligns with gold’s historical annual return rate since 1971.
Comparsion of Fees
ETF Fees: The DZZ Gold ETF has average fees of approximately 0.75%. Over a 20-year span, these fees would total $24,212.80.
OneGold Storage Fees: On the other hand, OneGold charges lower storage fees of 0.12% based on the gold’s value. After 20 years, the total storage fees amount to $4,043.72. This results in a notable savings of $20,169.08 compared to DGZ.
Understanding ETF Risks, Taxes, and Hidden Fees
It's important to recognize that different ETFs are subject to varying tax rates, which can affect your total returns. The type of ETF and its underlying assets can result in different tax implications, impacting your investment strategy. Additionally, fees for buying ETFs on some trading platforms can vary significantly, potentially reducing your investment capital if not properly accounted for.
Another risk to consider is the possibility of ETF closures. If an ETF shuts down, investors are often required to liquidate their holdings, potentially at a time when the market is unfavourable. This emphasizes the importance of understanding the stability and track record of the ETFs in which you invest. Thorough research into an ETF’s management and historical performance can help mitigate these risks.
Advantages of Holding Real Gold for Liquidity
Real gold offers excellent liquidity, allowing investors to sell or exchange it for currency or other assets as needed. Unlike some ETFs that do not provide direct ownership of the underlying gold, holding physical gold ensures tangible ownership and immediate access to your assets. This can be particularly beneficial during times of economic uncertainty or market volatility, as gold tends to maintain its value.
While some ETFs offer the option to exchange shares for physical gold, this process often comes with strict requirements and hidden terms. Investors should carefully examine these conditions to ensure they align with their investment objectives. Choosing a transparent vaulted gold option, like OneGold, provides a straightforward and clear method of accessing your assets, avoiding the complexities associated with certain ETFs.