In times of economic uncertainty, investors go back to the basics. They move into assets that have a long history of holding their value regardless of market volatility. Bonds are a common choice, along with stable currencies like the US dollar, the Swiss franc, and the Japanese yen.
There is also an increased appetite for defensive stocks like utilities, consumer staples, and healthcare. However, precious metals – gold, in particular – remain a favorite hedge against economic downturns. Precious metals have intrinsic value, and there is reliable demand supported by centuries of tradition.
The trouble with precious metals is that they have to be stored, and security is always a concern when there are large quantities of gold, silver, and titanium around. No one wants thousands of dollars worth of gold coins and bars in their home, and there is a hefty cost associated with commercial secure storage solutions.
One alternative to holding physical gold coins and bars is to purchase shares in exchange-traded funds (ETFs) and mutual funds that track the price of precious metals. Examples include:
ETFs
Mutual Funds
- First Eagle Gold Fund (SGGDX)
- Invesco Gold & Special Minerals (OPGSX)
- Franklin Gold and Precious Metals Fund (FKRCX)
Experienced investors may also trade gold futures and options in an effort to gain precious metal exposure.
There is another solution that is often overlooked: investment in the companies that mine gold. Certainly, it is possible to buy gold mining stock directly. Three that are widely considered a good value include:
Of course, relying on stock in individual companies doesn’t offer the sort of stability investors crave when markets are in turmoil.
A smart compromise between investing in gold directly and buying individual gold mining stocks is gold mining ETFs. Three popular choices include:
- U.S. Global GO GOLD and Precious Metal Miners ETF (GOAU)
- Sprott Gold Miners ETF (SGDM)
- iShares MSCI Global Gold Miners ETF (RING)
Two others that often come up, Direxion Daily Junior Gold Miners Index Bull (JNUG) and Direxion Daily Gold Miners Index Bull (NUGT), can be good temporary additions to your portfolio, but there are important issues to consider before you make a trade.
If you determine that this type of ETF is right for you, the next question is: JNUG vs. NUGT – which gold mining ETF is best?
What Are Leveraged ETFs?
JNUG and NUGT aren’t like standard ETFs. Standard ETFs are designed to mirror an underlying index or asset and match returns as closely as possible. For example, the SPDR Gold Shares ETF and the iShares Gold Trust are designed to track the price of gold.
The Direxion Daily Junior Gold Miners Index and Direxion Daily Gold Miners Index are tied to the MVIS Global Junior Gold Miners Index and NYSE Arca Gold Miners Index, respectively, but they have different objectives. Instead of trying to match the returns of the underlying indexes at 100 percent, both have stated goals of doubling those returns.
Leveraged ETFs don’t just hold the same assets as their underlying indexes – they experiment with debt and financial derivatives such as options contracts to amplify returns. When they are successful, investors realize impressive gains. When they miss the mark, losses exceed those of the underlying index.
These ETFs must be actively managed, so fees and expenses are higher than traditional ETFs. Generally speaking, they are best for experienced investors who have time to monitor the market and make trades promptly. It is critical to close positions in these ETFs in a timely manner to avoid catastrophic losses, and most traders consider them short-term, intraday investments.
Direxion Daily Junior Gold Miners Index Bull 2X Shares (JNUG) By The Numbers
Choosing the right leveraged ETF depends on a number of factors. One of the biggest is how the ETFs you are considering compare when it comes to the basics. Key facts for JNUG include the following:
- Launch Date – October 3, 2013
- Expense Ratio – 1.06 percent
- Assets Under Management (AUM) – $483.77 million
- Average Daily Volume (ADV) – $70.45 million
The underlying index that drives JNUG is the MVIS Global Junior Gold Miners Index. The top ten holdings for this index currently include:
- Pan American
- Evolution Mining
- Yamana Gold
- Merdeka Copper Gold
- Ssr Mining
- B2gold
- Endeavour Mining
- First Majestic Silver
- Alamos Gold
- Hecla Mining
As of April 20, 2022, JNUG has delivered the following returns:
- 1 Month – 12.37 percent
- 3 Months – 34.45 percent
- YTD – 35.96 percent
- 1 Year – (-8.63) percent
- 3 Years – (-39.18) percent
- 5 Years – (-40.15) percent
- 10 Years – N/A
A final note – some investors may remember that JNUG once had a goal of daily leveraged investment results totaling 300 percent of the MVIS Global Junior Gold Miners Index’s performance. That changed effective April 1, 2020, at which point JNUG adjusted its objective to daily leveraged investment results totaling 200 percent.
Direxion Daily Gold Miners Index Bull (NUGT) By The Numbers
NUGT is also managed by Direxion, but in a head-to-head comparison against JNUG, there are significant differences. Key facts for NUGT include the following:
- Launch Date – December 8, 2010
- Expense Ratio – 1.14 percent
- Assets Under Management (AUM) – $766.57 million
- Average Daily Volume (ADV) – $201.36 million
The underlying index that drives NUGT is the NYSE Arca Gold Miners. The top ten holdings for this index currently include:
- Newmont Corp
- Barrick Gold
- Franco Nevada
- Agnico Eagle Mines
- Wheaton Precious Metals Corp
- Newcrest Mining inary
- Gold Fields
- Anglogold Ashanti
- Northern Star Resources
- Royal Gold
As of April 20, 2022, NUGT has delivered the following returns:
- 1 Month – 14.83 percent
- 3 Months – 48.93 percent
- YTD – 50.53 percent
- 1 Year – 14.54 percent
- 3 Years – (-2.82) percent
- 5 Years – (-16.90) percent
- 10 Years – (-44.09) percent
Note that NUGT also aimed for 300 percent of its underlying index’s returns through March 31, 2020. As of April 1, 2020, the fund adjusted its goal to daily leveraged investment results totaling 200 percent of the NYSE Arca Gold Miners Index’s performance.
NUGT Vs JNUG: The Bottom Line
The bottom line is that both NUGT and JNUG should be considered very short-term investments, and long-term returns don’t accurately reflect intraday successes. Neither should be entered into lightly, as losses can spiral out of control quickly.
Experienced investors that are prepared to take on the risks of leveraged ETF investment should choose between JNUG and NUGT based on real-time market conditions. In addition to geopolitical events and large-scale economic trends that affect the market as a whole, the JNUG vs NUGT question can be answered through examination of activity in gold prices, changes impacting the gold mining industry, and factors affecting small-cap gold mining companies over more established, mature gold mining companies.
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