There was another one last week: why do I invest in a fund rather than an ETF when it comes to gold mining companies? I only asked myself this question after seeing a piece on gold miner ETFs in Moneyweek - the inconsistency hadn't occurred to me before!
(The ETFs discussed in Moneyweek were iShares SPGP, ETF Exchange's AUCO ($), AUCP (£) and RBS's GOLB - the last of these were synthetic/swap-based and all of them track indices. An investor like me has to know such things as whether the mining firms in the index hedge their gold - in which case they won't benefit so much from a rise in gold price. So, one reason why I don't fancy the gold miner ETFs at the moment is that a certain amount of knowledge is needed about the construction of an index, the construction of the product, the industry, the way companies operate that I do not have. That, though, is a retrospectively applied reason.)
I think that actual reason I haven't invested in them is simpler:
I invest in the Black Rock Gold and General fund because I can make a number of small investments that cost -as far as I can tell - 'nothing'. There are higher management charges but they appear to be less that what it would cost to make these small investments into an ETF. There are disadvantages in funds too, a big one being that I can only buy and sell once a day and at an unknown price.
Since I started this blog I have invested in the BlackRock fund seven times.
The first investment was £1000 on 23 September 2011 when the unit price was 1,608p and then in lots of £250 at irregular dates after that:
24/11/2011 - unit price 1,503p
25/11/2011 - unit price 1,484p
23/12/2011 - unit price 1,441p
21/03/2012 - unit price 1,438p
05/04/2012 - unit price 1,318p
11/05/2012 - unit price 1,200p
The total investment in the fund is now £2,500 and it would have cost me nearly £80 to have done this using ETFs. But this low cost has led me to owning more than I meant to. I have generally bought units when I couldn't make my mind up about spending £11.95 buying more physical gold ETF shares.
The investment was down 12.5% while the ETFs were level, although there's a bad history not shown there!
I got the pic below from OneMint which provided an interesting review of an indian gold mutual fund called SBI Gold Fund.