ETF Talk: Not Your Father

Precious metals such as gold and silver have enjoyed a strong move higher in recent months, so the roll out of two new funds focused on other precious metals is worth highlighting. I like funds to establish a minimum volume before I recommend them, so I simply will keep an eye on these funds for now. But they both are gaining trading volume quickly and they warrant watching closely.

This week, I will feature ETFS Physical Platinum Shares (PPLT), a trust that is designed for use by investors who want a cost-effective way to gain exposure to physical platinum. The shares are issued by ETFS Platinum Trust and are intended to reflect the price of platinum, less the trust’s expenses. It is similar to the high-profile SPDR Gold Shares (GLD), since each actually holds bullion bars of the precious metal that it represents.

PPLT began trading Jan. 8 and it already is racking up a daily trading volume that is averaging close to 300,000 shares a day. It is an impressive start for a new fund. Platinum jumped in value 56% last year. However, PPLT itself is down 2.84% between its opening price on its first day of trading and its closing price on Jan. 26. If the retreat continues for awhile, it would offer you a reduced entry price for buying PPLT. The ETF also is appealing because it has a modest expense ratio of just .60%.

An investment in PPLT is not the only way that you can place a bet on platinum. Exchange-traded notes (ETNs) tied to platinum can be purchased through UBS E-TRACS Long Platinum TR ETN (PTM) and iPath Dow Jones AIG Platinum TR Sub-Index ETN (PGM). However, PPLT stands out as the first platinum investment instrument to be launched on the U.S. exchange-traded fund (ETF) market. As any reader of my ETF Talk columns quickly learns, I love ETFs for their cost-effectiveness and diversification, among other advantages.

Your father and others of his generation may not have gone any further in buying precious metals other than investing in gold or silver. Gold and silver are as exotic as most investors probably will ever get in buying precious metals. But with the stock market still looking volatile and inflation potentially on the rise as many governments around the world run up big deficits, you may want to include more than just gold and silver in your portfolio to help protect your money. Ever since medieval times, metals have proven their worth as sturdy shields.

If you want advice from me about which ETFs to buy and to sell, I encourage you to sign up for my ETF Trader service by clicking here. As always, I am pleased to answer any of your questions about ETFs, so do not hesitate to contact me if you have one. To send your question to me, simply click here. You may just see your question answered in a future ETF Talk.