ProShares Ultra Gold
ProShares Ultra Gold (UGL) aims to deliver twice the daily performance of the Bloomberg Gold Subindex, providing investors with leveraged exposure to the gold market. This leveraged approach makes UGL a strategic tool for investors looking to capitalize on short-term movements in gold prices rather than long-term holds. However, due to the daily resetting of leverage, the fund's performance can diverge significantly from twice the return of gold over longer periods, especially in volatile markets.
UGL's portfolio consists primarily of gold futures contracts and other financial instruments that provide similar exposure to the gold market. As with other gold ETFs, investors should consider the tax implications, as long-term gains are taxed at the collectible rate of 28%.
$101.92
Change: ($-0.53) -0.52%Expense Ratio: 0.95%
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Expense Ratios vs Storage Fees
Expense ratios in ETFs denote the annual costs required to manage and operate the fund, including management fees, administrative expenses, and other costs. These fees, while often small, can significantly impact an investor's returns by reducing the net assets of the fund over time.
Physical bullion storage fees are fixed costs incurred to securely store the gold. These fees provide predictability compared to the variable expense ratios of ETFs. Comparing these fixed storage fees with the cumulative effect of expense ratios can help investors determine the most cost-effective strategy for their gold investments.
Expense Ratio for UGL
| Years | Net Investment | ETF Fees 0.95% (avg) | OneGold Storage 0.12% (Gold) | Assumes 8% expected return |
|---|---|---|---|---|
| 1 | $15,000 | $95.00 | $12.00 | Initial Investment = $10,000 |
| 2 | $20,000 | $251.80 | $31.91 | Yearly Investment = $5,000 |
| 3 | $25,000 | $479.16 | $60.90 | |
| 4 | $30,000 | $786.81 | $100.29 | |
| 5 | $35,000 | $1,185.57 | $151.56 | |
| 6 | $40,000 | $1,687.40 | $216.33 | |
| 7 | $45,000 | $2,305.58 | $296.43 | |
| 8 | $50,000 | $3,054.77 | $393.90 | |
| 9 | $55,000 | $3,951.20 | $510.97 | |
| 10 | $60,000 | $5,012.83 | $650.14 | |
| 20 | $110,000 | $30,259.23 | $4,043.72 |
For investors comparing the UGL Gold ETF to OneGold, it's essential to evaluate the associated fees and the net investment over time. This analysis will examine the cost implications over a twenty-year period, assuming an 8% expected return, aligning with gold's approximate annual rate of return since 1971.
Comparsion of Fees
ETF Fees: The UGL Gold ETF incurs fees averaging around 0.95%, leading to a significant cumulative fee over time. By year 20, the total fees paid to the ETF would amount to $30,259.23.
OneGold Storage Fees: On the other hand, OneGold imposes lower storage fees, at 0.12% of the gold's value. By year 20, the total storage fees paid to OneGold would be $4,043.72, resulting in a savings of $26,215.51 compared to UGL.
Understanding ETF Risks, Taxes, and Hidden Fees
The risk of ETF closures is a significant concern for investors, as it can force them to liquidate their positions at inopportune times, potentially leading to financial losses. This underscores the importance of thoroughly researching the stability and management of the ETF before investing. By evaluating the fund’s track record and the expertise of its management team, investors can mitigate these risks and make more secure investment decisions.
In addition to the risk of closure, tax implications and hidden fees are critical factors to consider when investing in ETFs. Different ETFs have varying tax treatments, which can significantly impact overall returns. Fees imposed by trading platforms for buying and selling ETFs can also accumulate over time, reducing investment capital. Being mindful of these costs and incorporating them into your investment strategy is essential for making informed decisions and maximizing returns.
Advantages of Holding Real Gold for Liquidity
Owning physical gold offers unmatched liquidity, allowing investors to quickly convert their assets into cash or other valuable items when needed. This is particularly beneficial during periods of economic instability when gold tends to maintain its value. Unlike some ETFs that do not offer direct ownership of the underlying gold, holding physical gold ensures immediate access and control over your assets, providing a sense of security.
Moreover, while some ETFs offer the option to redeem shares for physical gold, the process can be cumbersome and involve stringent conditions. Investors should carefully review these terms to ensure they align with their investment objectives. Opting for a transparent vaulted gold option like OneGold provides a straightforward method of accessing gold holdings, avoiding the complexities associated with ETF redemptions. This approach can be particularly appealing to those who prioritize liquidity and simplicity in their investments.