Both the Sprott Gold Miners ETF (Nysemkt: SGDM) i iShares Gold Trust (Nysemkt: Junior) offer exposure to gold, but their strategies and risk profiles diverge widely. This comparison uncovers cost, yield, risk, portfolio composition and trading characteristics to help investors decide which one best fits their goals.

Beta measures price volatility relative to the S&P 500; beta is calculated from five-year weekly returns. The 1-year return represents the total return over the following 12 months.

IAU is more affordable with an expense ratio of 0.25% compared to SGDM’s 0.50%, but its trailing 12-month return is substantially lower.

The iShares Gold Trust is designed to track the spot price of gold, providing direct exposure to physical bullion. With $78 billion in assets under management and a 21-year history, it serves as a highly liquid, low-cost vehicle for those seeking exposure to the price of pure gold.

The Sprott Gold Miners ETF has a concentrated portfolio of 43 gold mining companies. Its major holdings include American companies such as Agnico Eagle Mines Ltd. (TSX:AEM.TO), Newmont Corp. (NYSE: NO)i Wheaton Precious Metals Corp. (TSX:WPM.TO). Companies with higher revenue growth and lower debt-to-equity (D/E) ratios receive more weight within the portfolio.

For more information on investing in ETFs, see the complete guide at this link.

When investing in ETFs linked to the performance of precious metals, be aware of the increased volatility that can come with it compared to common stock-based ETFs. Precious metals can be very volatile, especially in times of economic and geopolitical turbulence.

Since gold is one of the most traded precious metals in the world, its price can fluctuate wildly. As of now, this has benefited investors as the metal benefits from international entities increasingly buying it for their reserves, while the US dollar has also weakened. But investors should still be aware that sudden drops can happen.

Choosing between these two ETFs produces similar results, as both are tied to the performance of gold. SGDM has performed better over a one-year period, but when you look at the price returns over a five-year period, they are almost identical. However, if some investors are not comfortable with an ETF that only holds gold, then SGDM may be more suitable.

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Ade Hennis has no position in any of the aforementioned stocks. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has one disclosure policy.

IAU and SGDM soar with record gold figures was originally published by The Motley Fool