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The choice between Goldman Sachs Physical Gold ETF (NYSEMKT:AAAU) and SPDR Gold Shares (NYSEMKT:GLD) likely comes down to cost versus liquidity, as both funds offer direct exposure to physical gold bullion.
Gold ETFs provide a convenient way to gain exposure to gold prices without the hassle of storing physical bars. While GLD is the industry pioneer and a favorite for high-volume traders, AAAU offers a more modern, lower-cost alternative for long-term investors looking to minimize fees.
Beta measures price volatility relative to the S&P 500; beta is calculated from monthly returns over the available fund history (up to five years). The 1-yr return represents total return over the trailing 12 months.
The Goldman Sachs fund is the more affordable option, with an expense ratio of 0.18% compared to the 0.4% charged by the SPDR trust. This expense gap of 0.22 percentage points can impact total returns over long holding periods.
SPDR Gold Shares aims to track the market price of physical gold bullion. Its portfolio consists entirely of cash and other assets, and its top holdings include physical gold at 100.00%.
The fund was launched in 2004. As the first gold ETF in the U.S., institutional investors frequently use it for its deep liquidity and high trading volume.
Goldman Sachs Physical Gold ETF also aims to track the spot price of gold bullion. Its composition similarly includes cash and other assets at 100%, while its largest positions include physical gold at 100.00%. The fund was launched in 2018. While it manages a smaller amount of assets under management (AUM) than the SPDR trust, its primary draw is its more competitive expense structure.
For more guidance on ETF investing, check out the full guide at this link.
AAAU and GLD are both physically backed trusts designed to track gold bullion, giving you exposure to an asset that typically performs well during turbulent markets. However, one may be a better fit for you than the other.
A lower expense ratio is important to you: AAAU carries an expense ratio of 0.18%, compared to GLD's 0.4%. That difference will compound over long holding periods. There's also a lower fee drag on larger balances. For example, on $100,000, the listed fee difference is approximately $220 per year before compounding.
You're a buy-and-hold investor: If you rarely trade, GLD's liquidity advantage may not justify paying so much more each year in expenses.
You prefer Goldman Sachs: If you already prefer Goldman Sachs' infrastructure, it could tip the scales toward AAAU.
You're a frequent trader: GLD trades more heavily, so it's usually easier to enter and exit a position. In addition, more trading activity can make it easier to buy or sell a large amount without moving the price by much.
You'd prefer a fund with a longer history: Whereas AAAU launched in 2018, GLD has been around since 2004, meaning brokers and traders are very familiar with it. This familiarity can support a robust trading infrastructure and liquidity.
In a nutshell, choose AAAU for long-term holding and lower fees. Choose GLD for frequent trading, larger orders, and tighter spreads.
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Dana George has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
Gold ETF Showdown: AAAU or GLD? was originally published by The Motley Fool
