Using exchange traded commodities (ETCs) may be the best route to track precious metals over other options, such as buying companies that mine the underlying element. We have made some changes to the funds on offer. Some of the products in the selection have also changed names in a rebranding by Invesco following its takeover of Source.
Dropped from 2017 selection
ETFS Physical Palladium (PHPD)
While palladium has provided returns in the past, the outlook for the element is uncertain and we no longer think this should form a core part of a portfolio, so it has been removed.
New list
Source Bloomberg Commodity UCITS ETF (CMOD)
This ETF was only launched last year but quickly became a firm favourite for commodity investors. The panel overwhelmingly recommended keeping CMOD, and it stays as the only synthetically replicated ETF in the selection. Investors must be aware of the 0.15 per cent swap fee that sits on top of the 0.19 per cent ongoing charge, but the fund tracks the commodities market well. iShares offers a similar product for the same ongoing charge but a lower swap fee. However, since launch the products’ performance is the same. Source’s fund remains the largest and the most liquid to trade. Invesco is currently rebranding its ETFs following the takeover of Source, so the product name may change.
Invesco Physical Gold ETC (SGLD) (formally called Source Physical Gold)
We still believe this is an excellent ETF for investors for their gold allocation, which is a good asset to include in a portfolio for diversification and safety. iShares offers a cheaper physical gold ETC, but only by 0.04 percentage points, and SGLD remains our preferred choice. It has a larger asset base and is more liquid – with a higher average trading volume – and has a far tighter bid/offer spread. It also has a lower tracking error. Gold acts as a portfolio diversifier, as well as a potential hedge against inflation. It tends to perform strongly when investors are nervous about the economic outlook.
Invesco Physical Silver P-ETC (SSLV) (formally called Source Physical Silver P-ETC)
Silver has multiple uses in acting as a hedge against inflation, but is also seeing its price increase with industrial activity, giving it slightly more of a cyclical focus than gold, but still making it a good store of wealth. The panel strongly recommended keeping this ETC in the selection; with a relatively low ongoing charge of 0.39 per cent, a very tight bid/offer spread and good daily volume, SSLV continues to perform and track the spot silver price very well.
To view the IC Top 50 ETFs 2018 by category, please click on the links below:
Emerging market equities (four ETFs)
NEW: Sterling corporate bonds (two ETFs)
NEW: Global bonds (three ETFs)
Commodities and precious metals (three ETFs)
