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Top 3 Precious Metal Funds to Buy as North Korea Crisis Escalates

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Last Sunday North Korea conducted their sixth nuclear test with a hydrogen bomb believed to be seven times more powerful than a similar bomb which destroyed Hiroshima.  A week prior to this test, Pyongyang successfully launched a ballistic missile over northern Japan.  Now the rouge nation claims its new hydrogen bomb can be mounted on the intercontinental ballistic missile and reach mainland U.S.A.  

While the international community has attempted sanction after sanction, North Korea has maintained and improved their nuclear capabilities over the past several years.  Further saber rattling by both the United States and their Allies has proven to be ineffective against Pyongyang’s weapons programs.  

Sunday’s test prompted the United Nations to call another emergency meeting where U.S. Ambassador Nikki Haley told the members that North Korea’s leader Kim Jong Un was "begging for war.”  Ambassador Haley also requested that the UN Security Council put into place the strongest and most punitive sanctions possible in order to detour the rouge countries nuclear program; this included cutting off all oil supplies.  President Trump also threatened to terminate all trading with any country that does business with North Korea.  

But the implementation of any further sanctions were soured when Russian President Vladimir Putin commented that any additional sanctions placed on North Korea would be “useless.”  He went on to state that Kim Jong Un believed that the survival of his regime was contingent upon the development of nuclear weapons and that the escalating crisis risked developing into a “global catastrophe.” President Putin said the only way to resolve this international issues was through diplomacy.  

Given the pace of the United Nations, and the length at which this issue has already been festering, a solution is still a bit away.  But in the meantime, tensions are rising, and anxiety continues to grow around the globe.  And when investors get nervous, they always run to gold.  This can be seen in the recent rise in gold and precious metal prices over the past few days.   

We have identified three precious metal mutual funds that are inexpensive, have low expense ratios, and are heavily weighted in precious metals.

The Picks

Vanguard Precious Metals & Mining (VGPMX - Free Report) was incepted in May 1984 and is managed by the M&G Investment Management Limited. The fund's main objective is to provide long-term capital appreciation. The fund invests in stocks of foreign and U.S. companies engaged in exploring, mining, processing, or marketing gold, silver, platinum, diamonds, or other precious metals and rare minerals. This fund may also invest up to 20% of its assets directly in gold, silver, or other precious-metal bullion and coins. The fund's adviser emphasizes quality companies with sound operations and attractive holdings of ore or other reserves, while also trying to maintain geographic diversity. Dividends and capital gains, if any, are distributed annually in December.

This fund requires a minimal initial investment of $3000, and has a low 0.40% management fee.  The total expense ratio is only 0.43%, and the fund has a year to date return of +13.1%.

Fidelity Select Gold Portfolio (FSAGX) was incepted in December 1985 and is managed by the Fidelity Group. The objective of this precious metal fund is to seek capital appreciation. The fund normally invests at least 80% of assets in common stocks of companies principally engaged in gold-related activities, and in gold bullion or coins. The management also invests in other precious metals, instruments whose value is linked to the price of precious metals, and securities of companies that manufacture and distribute precious metal and minerals products (such as jewelry, watches, and metal foil and leaf). The fund invests in domestic and foreign issuers. The fund offers dividends and capital gains in April and December.

The fund requires a minimal investment of $2,500, and has a management fee of 0.55%.  The total expense ratio is 0.84%, and the fund has a year to date return of +8.2%.

Deutsche Gold & Prec Metals Fund (SCGDX) was incepted in August 1988 and is managed by Deutsche Investment Management Americas Inc. The fund seeks maximum return (principal change and income) by investing at least 80% of its net assets, plus the amount of any borrowings for investment purposes, in common stocks and other equities of US and foreign companies engaged in activities related to gold, silver, platinum or other precious metals, and in gold coin and bullion directly. The fund invests 20% of its net assets in high-quality debt securities of companies in precious metals and minerals operations, and debt securities whose return is linked to precious metals prices. Dividends and capital gains are distributed annually in December.

This fund requires a minimal investment of $2,500, and has a management fee of 0.84%.  The total expense ratio is 1.02%, and the fund has a year to date return of +7.4%.

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