IShares Gold Strategy ETF
The IAUF Gold ETF provides investors exposure to gold price performance through a unique index composed of gold futures and gold Exchange-Traded Products (ETPs). Despite its imminent delisting from exchanges by August 12, 2024, IAUF offers a structured approach to gold investment. The underlying index allocates 76% to the Bloomberg Gold Tracker Total Return Index, focusing on liquid gold futures contracts traded on the CME. The remaining 24% is allocated to iShares Gold Trust (IAU), enhancing diversification within the fund's holdings.
A Cayman Islands subsidiary holds the gold futures, ensuring liquidity and operational efficiency. Unlike traditional commodity pools, IAUF issues shareholders a 1099 form for tax purposes, reflecting its equity-like treatment for tax reporting. Capital gains within the fund are taxed at standard rates, distinguishing it from higher tax rates typically associated with physical gold investments. The fund and its underlying index undergo quarterly rebalancing, previously managed actively until March 1, 2021, to maximize correlation with the index.
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Change: ($0) 0%Expense Ratio: 0.25%
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Expense Ratios vs Storage Fees
When investing in gold ETFs, the expense ratio is a crucial factor to consider. This annual fee covers the costs of managing the fund, including administrative and operational expenses. Although seemingly small, these fees can accumulate over time and impact your overall returns.
For physical bullion, storage fees are a significant consideration. These are the costs associated with securely storing your gold, whether in a bank vault or a specialized storage facility. Unlike the expense ratios of ETFs, storage fees are generally fixed, providing predictability in your investment costs. Weighing these two types of fees can help you determine the most cost-effective approach for your gold investments.
Expense Ratio for IAUF
| Years | Net Investment | ETF Fees 0.25% (avg) | OneGold Storage 0.12% (Gold) | Assumes 8% expected return |
|---|---|---|---|---|
| 1 | $15,000 | $25.00 | $12.00 | Initial Investment = $10,000 |
| 2 | $20,000 | $66.44 | $31.91 | Yearly Investment = $5,000 |
| 3 | $25,000 | $126.75 | $60.90 | |
| 4 | $30,000 | $209.64 | $100.29 | |
| 5 | $35,000 | $315.15 | $151.56 | |
| 6 | $40,000 | $449.64 | $216.33 | |
| 7 | $45,000 | $614.86 | $296.43 | |
| 8 | $50,000 | $817.97 | $393.90 | |
| 9 | $55,000 | $1,060.59 | $510.97 | |
| 10 | $60,000 | $1,348.86 | $650.14 | |
| 20 | $110,000 | $8,349.77 | $4,043.72 |
When evaluating the IAUF Gold ETF against OneGold, it is essential to factor in the fees and the overall net investment over an extended period. We'll explore how the costs accumulate over twenty years, with an anticipated 8% annual return, which reflects the historical performance of gold since 1971.
Comparsion of Fees
ETF Fees: The IAUF Gold ETF charges fees that average approximately 0.25%. Over a 20-year period, this results in total fees amounting to $8,349.77.
OneGold Storage Fees: On the other hand, OneGold charges a lower storage fee of 0.12% of the gold’s value. Over twenty years, the total storage fees would reach $4,043.72, providing a savings of $4,306.05 compared to the IAUF Gold ETF.
Understanding ETF Risks, Taxes, and Hidden Fees
Investors should be aware that ETFs are subject to the risk of closure, which can force liquidation of holdings, often at inopportune times. This makes it crucial to research the ETF’s stability and historical performance before investing. Understanding the management team's track record and the ETF's longevity can help mitigate the risks associated with potential closures and ensure a more secure investment.
Tax implications and hidden fees are other critical factors to consider when investing in ETFs. Different ETFs have varying tax treatments, which can affect your overall returns. Additionally, fees charged by trading platforms for ETF transactions can add up over time, reducing your investment capital. Being mindful of these costs and incorporating them into your investment strategy can help you make more informed decisions and maximize your returns.
Advantages of Holding Real Gold for Liquidity
Physical gold offers unmatched liquidity, allowing investors to quickly convert their holdings into cash or other tangible assets. This is particularly advantageous during periods of economic instability when gold tends to maintain its value. Unlike some ETFs that do not provide direct ownership of the underlying gold, holding physical gold ensures immediate access to and control over your assets, providing a sense of security.
Furthermore, while some ETFs allow for the redemption of shares for physical gold, this process can be complex and involve stringent conditions. Investors should carefully review these terms to ensure they meet their investment goals. Choosing a transparent vaulted gold option like OneGold provides a straightforward method of accessing your gold holdings, avoiding the complexities and uncertainties often associated with ETF redemptions. This can be particularly appealing to those who value liquidity and simplicity in their investments.