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Tuesday, January 22nd, 2019 - Buy Gold - Bringing you trusted gold news and gold investing information since 2006

What a Difference 15 Basis Points Make

By Lara Crigger

Last week, I mentioned a curious fact gleaned from the most recent slew of 13-F filings: Billionaire investor and avowed gold aficionado George Soros increased his holdings of the SPDR Gold Trust (NYSE Arca: GLD) last quarter by 0.5%.

I was – and remain – unimpressed with his choice. Although I glossed over my reasons at the time, I thought it might warrant further explanation.

With more than $52 billion in assets under management, GLD is the clear behemoth of gold investments. It’s highly liquid and offers low spreads, and day-to-day, it tracks the price of gold pretty darn well.

But as a long-term buy-and-hold investment, it stinks.

Running a full analysis on the long-term monetary benefit of holding bullion versus GLD is beyond the scope of this article (For a number-by-number comparison, I encourage readers to check out Julian Murdoch’s excellent analysis, “Is GLD a Good Deal?”). Suffice to say that the numbers show that the longer you hold your gold allocation, the more money you save holding it in physical – not ETF – form.

Which is why I can’t understand why a smart guy like Soros doesn’t convert over to physical bullion like David Einhorn did back in 2009. Clearly he’s just sitting on his gold allocation – why not save a little money besides?

Maybe Soros likes the flexibility that an ETF vehicle offers, and I won’t argue with that. But if he is dead-set on holding only exchange-trade gold, then he could still be saving a boatload of cash.

Soros holds more than $738 million in exchange traded vehicles, but his allocation to physical gold ETFs make up more than 98% of that value. [He also holds $885,000 worth of the Market Vectors Gold Miners ETF, (GDX)].

The GLD/IAU proportion breaks down as follows:

Source: SEC

Soros may hold more shares of IAU, but value-wise, his GLD holding soaks up more of his portfolio value (since GLD shares currently cost roughly ten times those of IAU). The two funds, however, are essentially the same: both are highly liquid, secure physically-backed ETFs. The main difference is fifteen basis points: GLD’s expense ratio is 40 basis points a year, while IAU’s is only 25.

Run the math, and you’ll see that not only does Soros pay more in expenses on his gold funds than most of us make in a year, but he spends most of it on the higher-cost GLD:

If he converted the remaining 4,721,808 GLD shares over to IAU, he’d save almost a million dollarsin annual expenses:

For many of us, that alone would be a pretty compelling reason to switch. Granted, Soros may have good reasons for sticking with GLD over IAU. But cost alone can’t be one of them.

The takeaway here is clear: Even when it comes to physically-backed ETFs, expenses can add up over time and make a real, tangible difference in your overall returns.

The original article is published at

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