Constructing a portfolio for the retirement years requires one to focus on portfolio risk or uncertainty while not neglecting return. If the portfolio asset allocation plan is too conservative, the return will not meet lifestyle expectations. Inflation is again on the rise and this needs to be taken into consideration when putting together a retirement oriented portfolio. Below is a combination of index ETFs that project respectable returns while holding down portfolio volatility. Words: 455

The average annual equity return for individual investors has been 60-65% less ( 6-7 percentage points less), over a 20 year period, than the performance of the indices that everyone assumes reflect investor returns! In spite of such a dramatic  under-performance that fact is being ignored because it is not useful to academics or investment companies – but I would think it is of interest to YOU! Words: 729

So says Lorimer Wilson, editor of www.FinancialArticleSummariesToday.com (A $ite for sore eyes and inquisitive mind$) and www.munKNEE.com (Your Key to Making Money!). Please note that this complete paragraph, and a link back to the original article*, must be included in any article posting or re-posting to avoid copyright infringement.

Eric Falkenstein conveys in paraphrased excerpts from an article* that:

N. Scott Pritchard, relying on the annual Dalbar study which consolidates data from the Investment Company Institute, looked at data from 401(k) plans from 1988 through 2007, and found that (see chart below), while the S&P 500 returned 11.81% annually and Treasury bills returned 4.53%, the average investor achieved a return of only 4.48% [a 62.07% underperformance or 7.33 percentage points].

Indeed, more recent research has shown that over the twenty years ending in 12/31/2010, the S&P500 was up 9.14% while the average annual equity return for investors was only 3.27% [a 64.22% underperformance or 5.87 percentage points].

So says the Andy Hagans (www.etfdb.com) in an article* which Lorimer Wilson, editor of www.munKNEE.com (Your Key to Making Money!), has further edited ([ ]), abridged (…) and reformatted below for the sake of clarity and brevity to ensure a fast and easy read. The author’s views and conclusions are unaltered and no personal comments have been included to maintain the integrity of the original article. Please note that this paragraph must be included in any article re-posting to avoid copyright infringement.

Hagans goes on to say:

Gold is an effective “dollar hedge” – it tends to rise as investors become uneasy with the idea of keeping their holdings tied up in the U.S. currency… Five years ago, it was difficult for investors to efficiently invest in gold bullion but the development of the ETF market has changed that. Gold ETNs and ETFs are an efficient way to invest in the metal without dealing with the associated “headaches” of holding a physical amount of gold in your possession…

How Gold ETFs (and ETNs) Work
Since gold is a commodity, many investors assume that gold ETFs are essentially identical. While there are a number of factors that make the various gold ETF products unique, the most important is the manner in which they achieve exposure to gold prices.

1. Some gold ETFs buy and physically hold gold bullion (i.e., they have massive collections of gold bars) and track the spot price of gold very accurately because the value of the underlying holdings depends solely on the market price of bullion. Examples of such ETFs are as follows:
a) SPDR Gold Trust (GLD) – MER of 0.40%
b) iShares COMEX Gold Trust (IAU) – MER of 0.40%
c) ETFS Physical Swiss Gold Shares (SGOL) – MER of 0.39%

2. Some ETFs invest in futures contracts which track the spot price of bullion closely but may deviate occasionally due to phenomenons such as backwardation and contango in commodity futures markets. Some examples of such ETFs are:
a) PowerShares DB Gold Fund (DGL) – MER of 0.50%
b) UBS E-TRACS CMCI Gold Total Return (UBG) – MER pf 0.30%

For investors with significant gold holdings, diversification across custodians and geographies may be desired as well. While a repeat of the U.S. gold confiscation of 1933 is unlikely, it isn’t completely impossible. Some investors may sleep better at night knowing their gold is securely stored in multiple locations in different parts of the world. For this reason, London-based ETF Securities offers an ETF that stores its gold in Switzerland, a country long known for being friendly to investors.

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Gold bugs will also see the benefits of diversifying their holdings across custodian. While the likelihood of any shenanigans involving gold holdings is incredibly remote, the last two years have taught us to never count anything out. JP Morgan serves as the custodian for SGOL, while HSBC and the Bank of Nova Scotia serve as custodians for GLD and IAU.

Precious Metals ETFs
In addition to ETFs that invest exclusively in gold, there are two precious metals funds in the U.S. (and a number in Canada) that offer exposure to both gold and silver utilizing futures contracts to tract the price of a basket of precious metals that is tilted heavily towards gold. The American ETFs are:
a) PowerShares DB Precious Metals Fund (DBP) – 80.0% gold
b) iPath Dow Jones-UBS Precious Metals ETN (JJP) – 68.5% gold

“Indirect” Gold ETFs
For investors who are uneasy about investing directly in commodities (or futures contracts on commodities), there are ways to gain exposure to gold prices while sticking to equities as follows:
a) The Gold Miners ETF (GDX) is based on an index that provides exposure to publicly-traded companies engaged in mining for gold. Because the revenues of these companies are directly related to the market price for gold bullion, there tends to be a strong correlation between these equities and gold prices. Since GDX was launched in May 2006, it has maintained a correlation with GLD of approximately 0.35.
b) The Junior Gold Miners ETF (GDXJ), with an expense ratio of .60%, focuses on equities of small- and mid-cap companies engaged in the development of new sources of gold either through greenfields exploration or the use of new geological models to search for gold in overlooked and abandoned areas.
c) The Hard Assets Producers ETF (HAP) which, while offering limited exposure to companies engaged in the precious metals business, is more heavily tilted towards energy and agriculture companies.

Leveraged And Inverse Gold Exposure
The options for investing in gold through ETFs don’t stop with “plain vanilla” long funds. While many long-term investors will want to hold a small amount of gold in their portfolios, yellow metal isn’t exclusively for buy-and-holders. Speculators with strong opinions on short-term price movements of the “yellow metal” There are several exchange-traded products that offer leveraged and inverse exposure to gold prices, namely:
a) PowerShares DB Gold Double Long ETN (DGP), 200%, Monthly
b) PowerShares DB Gold Double Short ETN (DZZ), Inverse -200%, Monthly
c) ProShares Ultra Gold (UGL), 200%, Daily
d) ProShares UltraShort Gold (GLL), Inverse -200%, Daily
e) PowerShares DB Gold Short ETN (DGZ), Daily

*http://etfdb.com/2009/the-definitive-gold-etf-guide-five-minute-edition/

Related Articles:

 1. All Gold and Silver ETFs are NOT Created Equal! Here’s the Best

Whole oceans of ink have been spilled detailing the good and not-so-good points of the closed-end fund CEF (Central Fund of Canada) and the twin ETF’s GLD (SPDR Gold Trust) and SLV (iShares Silver Trust) funds. My goal here is to distill the salient points down to the fewest words possible to help make your due diligence task somewhat less…well…tasking. [Let's go!] Words: 650

The most common misunderstandings regarding the primary gold ETF, SPDR Gold Trust (NYSE:GLD) is that it buys and sells gold. That is not the case. It is just a paper asset. It is not a way to buy gold and have someone else store your holdings for you. It is just an innovative way to “own gold.” [Below I outline more of  just what GLD is and is not:] Words: 1470

I have always been leery of the two big exchange traded funds, SLV and GLD, because they lease the gold and silver that they sell you. I much prefer the ETFs  SGOL, CEF, PSVL and PHYS which actually own the gold and silver they sell you and store it for you segregated vaults.  Words: 717

So says George Maniere (investingadvicebygeorge.blogspot.com) in an article* which Lorimer Wilson, editor of www.munKNEE.com (It’s all about Money!), has further edited ([  ]), abridged (…) and reformatted below  for the sake of clarity and brevity to ensure a fast and easy read. Please note that this paragraph must be included in any article re-posting to avoid copyright infringement. 

Maniere goes on to say, in part:

I recommend that you move away from GLD and SLV and move instead into the physical funds such as the silver Sprott fund (PSLV) and the gold Sprott fund (PHYS). These funds are not true ETFs. They are closed ended funds which means you are not buying shares, but rather units. (The knock on the Sprott funds is that they carry a hefty premium, but that is only the case if you are going to take possession of the gold or silver.) The physical gold and silver is audited every year and you know that you will not wake up one morning to find that the gold and silver “leased” to GLD and SLV are now not worth the digital bytes they are printed on…

We are in a “new normal” environment with a future of low returns and high volatility. The Fed is pledging to keep short-term interest rates near zero through mid-2013. [Nevertheless,] in this low-yield world, there are still plenty of large ETFs offering yields higher than the 10Year Treasuries. [Let me explain in detail below.] Words: 723

So says Hao Jin in an article* posted on SeekingAlpha.com which Lorimer Wilson, editor of www.munKNEE.com (It’s all about Money!), has further edited ([  ]), abridged (…) and reformatted below  for the sake of clarity and brevity to ensure a fast and easy read. Please note that this paragraph must be included in any article re-posting to avoid copyright infringement. Jin goes on to say in the article:

Whole oceans of ink have been spilled detailing the good and not-so-good points of the closed-end fund CEF (Central Fund of Canada) and the twin ETF’s GLD (SPDR Gold Trust) and SLV (iShares Silver Trust) funds.

So says an article* posted by the editor of survivalus.blogspot.com which Lorimer Wilson, editor of munKNEE.com,  has further edited ([  ]), abridged (…) and reformatted below  for the sake of clarity and brevity to ensure a fast and easy read. Please note that this paragraph must be included in any article re-posting to avoid copyright infringement. The article goes on to say:

1. To Audit or Not to Audit:

• CEF’s bullion reserves are audited by an independent firm, Ernst & Young LLP., twice per year.
• GLD and SLV on the other hand do not permit any such transparency. Echoing the former sentiments of disgraced trader Bernie Madoff, investors are just supposed to trust the “word” of the funds that the bullion is there.

2. Insurance:

• CEF’s gold and silver is fully insured by Lloyd’s of London.
• GLD and SLV fully acknowledge that their “reserves” are not insured against any happenstance that may prevent them from repaying their investors in gold or silver. They even reserve the right to compensate investors in US paper dollars if necessary.

3. Counter Party Risk :

• CEF’s reserves are fully allocated and segregated with the name of each investor attached to particular gold and silver bullion.
• GLD and SLV’s “alleged” bullion is unallocated and unreserved. There’s no telling just how many competitors you’d have to fight off to get any of your precious metals with these funds.

4. Conflicts of Interest:

• CEF has been in the close-ended fund business backed by gold and silver since 1961. Their directors are well respected in the precious metals market.
• The custodians of GLD and SLV are HSBC and JP Morgan respectively.

Where do I start with these two banks (above)? Well, let’s just say if there was a Who’s Who publication of precious metal naked shorters and market manipulators these firms would be prominently featured. How can you trust a custodian of your long interest metal fund who is accused of making fortunes by manipulating the metal prices downward? Anyone thinking of the fox guarding the chicken coop metaphor here?

5. Premiums Above Metal Price:

•  CEF, unlike it’s ETF step brothers, often sells at a premium to the price of gold and silver. If you’re a day trader that means you can buy and sell shares of the ETF’s more cheaply than you can with CEF [which gives a slight nod to]GLD and SLV. However, for my part, I’m in a long term holding strategy so a small premium is the least of my concerns.

Conclusion

Frankly, I see the [above] premium as just an outward manifestation of the inherent preference by sensible investors for a fund that has actual, real gold and silver backing it up rather than glittering ethereal promises of metals.

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As you might suspect, I own CEF and wouldn’t touch GLD and SLV with your…well…hand!

Other Articles of Interest on the Above Subject:

• Why GLD Is My Choice Over Every Other Stock and ETF:
• Gold Bullion ETFs: A Primer

Exchange-traded mining sector funds (ETFs) are a great way to get involved in this potentially highly profitable business. Let me tell you why, where and how to do so.

So says Ron Rowland (www.moneyandmarkets.com) in his article* which Lorimer Wilson, editor of www.munKNEE.com, has reformatted into edited [...] excerpts below for the sake of clarity and brevity to ensure a fast and easy read. (Please note that this paragraph must be included in any article re-posting to avoid copyright infringement.) Rowland goes on to say:

Before we go any further, we need to make an important distinction. Mining sector ETFs are not the same as ETFs that are based on physical metals. Mining stocks are still stocks. Their performance is [primarily] related to the [performance of the] underlying commodities but not always [because the] stocks can go down even if the underlying commodity goes up and vice versa.

There is Gold in These ETFs!

You might not be a prospector yourself, but you can still share in the profits by bankrolling today’s forty-niners. Here are three ETFs that focus on gold mining stocks:

Market Vectors Gold Miners (GDX) is the most-active of the ETFs in this category and also the most liquid. It concentrates on the liquid, large-cap stocks of companies in the gold mining business.

• Market Vectors Junior Gold Miners (GDXJ) zeros in on small-cap gold producers. These are riskier stocks, but they also have tremendous potential.

Global X Gold Explorers (GLDX) is a new fund that tries to get even more specialized. It owns early-stage companies that are still looking for gold — and haven’t necessarily found it yet. As you might imagine, this makes GLDX a high-risk play with potentially great rewards.

Gold miners/explorers aren’t the only ones with their own ETFs, of course. Let’s widen our view to look at some others …

Silver, Platinum, Copper and Rare Earth Metal ETFs are Precious Too!

a) Silver and platinum are also very rare, and throughout history they have been used in much the same way as gold. Silver is often thought of as the “poor man’s gold” and platinum is even more valuable than gold in some ways – and then there is copper …

b) While copper is used primarily for industrial purposes it  is often found alongside silver and, as such, is sometimes thought of as a semi-precious metal. Pennies used to be pure copper; today they are mostly zinc with a thin copper plating.

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c) Rare earth metals are super-rare minerals needed for high-tech manufacturing and some of them are extremely valuable — and extremely scarce.

You can take your pick of mining stocks focused on all these metals. If you want to choose some ETFs — which I highly suggest — here are some to consider:

• Global X Silver Miners  (SIL)
• First Trust ISE Global Platinum (PLTM)
• Global X Copper Miners (COPX)
• First Trust ISE Global Copper (CU)
• Market Vectors Rare Earth/Strategic Metals (REMX)

The “Hottest Metal” of All is Uranium and It Now Has Its Very Own ETF!

Uranium is found in low levels within rocks and soil and its primary use is in nuclear reactors where one kilogram of uranium can provide as much energy as tons of coal. [As a result] I expect uranium demand will continue to increase — and the companies involved in producing it will continue to profit.

Right now the uranium industry is dominated by a handful of companies and, as such, a good way to cover all the bases is with a new ETF, Global X Uranium (URA), which  just came out last week but trading has been heavy so far.

Some Advice on Buying Mining Sector ETFs

There are many other ETFs with varying levels of exposure to the mining sector. Those I’ve named here are only a small sample and the list is growing quickly as ETF sponsors try to get a piece of this fast-growing niche.

Be aware that most of the mining stocks in ETFs, other than a few in the large-cap category, tend to be small and illiquid – and the same applies to the ETFs that own these stocks so watch the trading volume and use a limit order whenever you buy or sell.

*http://www.moneyandmarkets.com/go-for-the-gold-with-mining-etfs-40761?FIELD9=2

Investing in some form of precious metals is the preferable way to protect oneself from rising inflation/decrease in the value of the U.S. dollar and, to that end, below are 10 ETFs and ETNs and 5 mutual funds to do just that.

So says P.Radomski (www.sunshineprofits.com) in an article* which Lorimer Wilson, editor of www.munKNEE.com, has reformatted into edited [...] excerpts below for the sake of clarity and brevity to ensure a fast and easy read. (Please note that this paragraph must be included in any article reposting to avoid copyright infringement.) Radomski goes on to say:

One’s portfolio should have at least one asset that will retain value should the U.S. dollar’s value drop significantly. Such categories to consider are the emerging markets, precious metals and TIPS.

TIPS
- make sense only if you believe that the inflation numbers are correctly representing the situation in the economy. Since I have a hard time believing this (as the way the inflation is measured has been changing and is currently – politely speaking –suspicious) I can’t recommend purchasing TIPS.

Emerging Markets
- provide an interesting way to diversify one’s stock holdings, but given the level of globalization in the financial markets, it is likely that any serious plunge in the US would translate into a similar development on the emerging markets as well.

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Precious Metals
- the best way to go. Below are some alternatives to consider:

a) Exchange Traded Funds (ETFs) and Exchange Traded Notes (ETNs)
- a convenient way to trade any market but, since they add another layer to the risk pyramid because there is one more entity between you and the place where your money, I prefer owning stocks and especially metals, directly. However, since ETFs, ETNs, and precious metals mutual funds might still be preferable way of being in the precious metals market for many investors, I have prepared a list of the most interesting funds that you might be interested in as follows:

• DBP – based on UBS Bloomberg CMCI Gold Total Return index. In short, this ETFs performance is a weighted average of gold’s and silver’s gains with the following weights: 80% gold and 20% silver

• DBS – based on the Deutsche Bank Liquid Commodity Index – Optimum Yield Silver Excess Return™ – tracks the price of silver

• DGL – Deutsche Bank Liquid Commodity Index – Optimum Yield Gold Excess Return™ – tracks the price of gold

• DGZ – 100% anti-gold, moves in the opposite direction to gold. Purchase if you want to profit on gold’s decline.

• DZZ, GLL – like the above, but these funds involve double leverage. In other words, if gold gains 1%, this fund loses 2%.

• GDX – 100% precious metals stocks, based on the GDM Index

• GLD, IAU – price of these funds reflects the value of gold owned by each trust

• XGD.TO – it replicates, the performance of the S&P®/TSX® Global Gold Index, so it offers considerable exposure to Canadian gold stocks.

b) Mutual Funds:

• PMPIX – aims to track the performance of the Dow Jones Precious Metals Index (PM stocks) with a 1.5x leverage factor. It uses at least 80% of its capital to purchase equity securities contained in the index. In other words – it is in a way similar to GDX, but it involves more leverage.

• FSAGX – Fidelity Select Gold invests at least 80% in gold and gold securities

• USAGX – USAA Precious Metals and Minerals is very similar to the above fund (at least 80% in gold and gold securities). Additionally, the remainder (capital not invested in PMs) may be used to purchase other natural resource stocks

• TGLDX – Similar to FSAGX, but with not more than 20% of the fund’s total assets invested directly in bullion / metals themselves. Therefore, this fund is more of a proxy for PM stocks, than FSAGX is.

• UNWPX – Again, this fund invests at least 80% in companies principally engaged in the exploration for, or mining and processing of, precious minerals such as gold, silver, platinum group, palladium and diamonds. The difference here is that it invests at least 40% of its assets in securities of companies that are economically tied to at least three countries other than the U.S. Therefore, it offers a considerable geographical diversification.

In Summary
One of the best ways to protect yourself from rising inflation and a decrease in the value of the U.S. dollar is putting at least a part of your assets into precious metals…

[While] there is nothing like holding the [actual] metal in your physical possession, if the choice is between owning them through a fund or not owning them at all, I would certainly go with the former option.

*http://www.safehaven.com/article-14772.htm (SunshineProfits.com provides professional support for precious metals investors and traders).

Editor’s Note:
- The above article consists of reformatted edited excerpts from the original for the sake of brevity, clarity and to ensure a fast and easy read. The author’s views and conclusions are unaltered.
- Permission to reprint in whole or in part is gladly granted, provided full credit is given as per paragraph 2 above.
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