As competition is intensifying in the ETF space, lower fees are gaining prominence as a tool to attract investors. For a long period of time, the lowest cost corner of the market was dominated by Charles Schwab and Vanguard.
Of late, several issuers have been eyeing a bigger pie of the ETF market and have thus slashed their fees considerably. Among them, BlockRock and Fidelity deserve a special mention (read: Will Low Cost ETF Strength Make Vanguard Top Asset Manager Soon?)
SPDR’s New GLDM is Dirt Cheap
Joining the bandwagon of low-cost products, State Street’s SPDR recently launched a gold bullion ETF — SPDR Gold MiniShares Trust (GLDM - Free Report) (read: State Street Intensifies ETF Fee War).
The fund reflects the performance of the price of gold bullion. It is a cost-effective way for gold investing as it charges the lowest in the space — 18 bps. The fund has amassed about $54 million in assets since making a debut in late June.
How Does It Fit in a Portfolio?
Trade war and increasing inflationary expectations are fears gripping investors at the moment. While this is a headwind for the broader market in general, a certain section of the investing universe — gold ETFs — are expected to stay steady (read: Tariff Threats Become Reality, Add 6 ETFs to Your Arsenal).
Gold is a safe haven asset. So, if the trade tensions between China and the United States keep escalating and stocks slump, gold investing may sizzle. Plus, if the import tariffs are enacted, it could result in an increase in raw material costs for manufacturers that use these metals.
Manufacturers might try to pass on a certain portion of higher material prices to consumers. This in turn will add to inflationary pressure. Investors should note that gold is commonly viewed as an inflation-protected asset and thus has a chance of winning ahead.
Will It See Success?
Competition in the ETF market is intense. So, the expense ratio war is likely to continue in the near term. Several asset managers are ready to cut fees further to attract investors’ fund and gain market share.
So, the latest move by State Street to introduce a gold bullion ETF with the lowest cost should see success ahead. In fact, it would also be interesting to see if GLDM can cannibalize some of the assets of the biggest ETF of the space — SPDR Gold Shares (GLD - Free Report) . The expense ratio of GLD is 0.40%.
As far as competition is concerned,GraniteShares Gold Trust (BAR - Free Report) charges 20 bps in fees, the lowest after GLDM. So, this could pose threat to the newbie. Then there is the $10.7-billion fund iShares Gold Trust (IAU - Free Report) , which charges 25 bps in fees.
Want key ETF info delivered straight to your inbox?
Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week. Get it free >>