The first 100 days of Trump 2.0 have been anything but “business as usual.”  During the past several weeks with tariff wars and Administration policy changes taking center stage, huge volatility swings in both directions have greatly disturbed many investors.  Seemingly, there has seldom been a better time to be a volatility trader.

All this may sound like a warning to “head for the hills.” Most investment strategists and financial advisors have been urging investors not to react to this disturbing volatility by heading for the exits with their stocks. I agree.  That is called selling at the bottom and leaving a bank account with no hedge against inflation and avoiding the best way for most Americans to grow assets.  Armageddon is a sucker’s bet.  Whether or not there is a recession and whether or not the US dollar and related capital markets continue to fall, the entire US economy is extremely unlikely to fail.  There is every reasons to believe that the US capital infrastructure is resilient. 

The most likely scenario by far is that we are currently stuck in a downward market cycle of indefinite length.  Other factors feared now such as stagflation and recession that might exacerbate the length and depth of a market decline are likewise cyclical.  They will eventually reverse. Therein lies the rub

History has shown that when a bear market starts reversing, investors miss very significant proportions of recovery by missing the first five market trading days.  Frequently that 5-day gain has constituted more than 50% of the eventual recovery.  The data-driven conclusion is that redeeming all equity exposure and waiting for things to get better is an extremely costly strategy. 

In fact, many financial advisors are concerned that the recent downturn has taken investors significantly away from their strategic allocations.  In some cases, an investor trying to maintain a 60% stocks, 40% other (Bonds/cash/gold) may now be at 50%-50%. In fact, for those who believe that last week’s bounce is the beginning of a recovery, this might be a propitious time to rebalance using ETFs.

I urge those looking to establish such positions by buying ETFs to avoid paying more money for the same exposures.  There are many ETFs, usually older choices, which have substantially higher fees than relative newcomers.  When buying new shares, it is important to consider trying to avoid such traps.

My first example refers to buying S&P 500 exposure. The S&P 500 is the most used US equity market benchmark, and three of the four largest ETFs are S&P 500 Index Funds.

One of the most well-known ETFs for obtaining such exposure is the SPDR S&P 500 ETF Trust sponsored by State Street Global Advisors (SSgA), better known by its ticker symbol SPY.  This ETF is an inferior alternative to three other S&P 500 ETFs for two reasons:

1. Its fee is 0.065% (six and one-half basis points) or more higher than the three major alternatives.

2. It has an antiquated UIT--style structure that does not allow it to reinvest dividends or to lend its securities, both of which increase total returns. This contributes to a relative annual shortfall in investor return of an average of 0.12% (12 basis points) per year.

In lieu of buying SPY to gain S&P 500 index exposure, investors should consider one of the three alternatives:

1. iShares S&P 500 ETF – Ticker Symbol IVV
2. Vanguard S&P 500 ETF – Ticker Symbol VOO
3. SPDR Portfolio S&P 500 ETF – SPLG

This chart provides additional insights

This chart demonstrates the differences in fees and structural execution that has translated to disparate returns and dividend income yields during the past five years. Perhaps the best reflection of these disparities is shown by the row showing the year-to-date fund flows. Given that institutional investors dominate ETF cash flows and that they all have teams of savvy analysts, it is no wonder that the three more efficient and less costly ETFs accumulated positive cash flows while SPY has lost more than $14 billion. In fact, one of the big ETF stories of the year has been how State Street’s original SPDR, SPY, relinquished its 31-year assets-under-management (AUM) crown to Vanguard’s VOO.

A similar but easier dichotomy exists for investors desiring midcap exposure.  There are only two ETFs based on the S&P Midcap 400 Index.  One of them, State Street’s MDY, has the same less efficient trust structure as SPY applied to a different index.  The other is iShares Core S&P Mid-Cap ETF (IJH).

Here the expense ratio disparities are even greater. MDY still charges 24 basis points per share while the more efficient IJH charges just 5 basis points.  These differences are reflected in superior fund flows, assets under management, dividend yields and returns for IJH.   

Given ultra-dynamic geopolitical situations, many pundits are stating that this is the best time in decades to diversify equity holdings internationally.  There are more than 1,000 passive and active equity ETFs.  To simplify things, I chose comparisons of two single country funds representing two families: iShares and Franklin. The two countries are Japan and Australia. 

There are huge differences in expense ratios for essentially, albeit not exactly, the same exposures. The 10 largest holdings are identical, and the distribution percentages of the underlying industrial sectors are very close. From my analysis, the exposures are essentially the same but the cost and return differences are huge.  Nine basis points (0.09%) for the two Franklin single-country ETFs as compared with 50 basis points (0.50%) ETF. 

The two Japan ETFs are iShares MSCI Japan (EWJ) and Franklin FTSE Japan (FLJP).  Here is a side-by-side comparison. 

Although EWJ continues to dwarf FLJP on assets under management, trading volume and net fund flows, FLJP has been far more beneficial to its owners with higher returns in all periods and a dividend yield that is close to double that of EWJ.  With FLJP now approaching the $2 Billion threshold in AUM (Assets Under Management) and with a track record this stark and an expense ratio difference where investors pay more than five times more for EWJ, I would be very surprised not to see FLJP reach the $10 billion mark much more quickly than the time it took them to get to $2 billion.

In Australia, the comparison is not quite so stark.  The two ETFs in question here are the iShares MSCI-Australia ETF (EWA) and the Franklin FTSE Australia ETF (FLAU). 

The fee differentials are still identical by a multiplier of 5.5. FLAU’s historical return numbers are all higher than those of EWA but this time around the differences are much smaller.  The largest differential in EWA’s favor is dividend yield because it has a slight edge here.  An even more daunting disadvantage for FLAU is that in more than seven years, it has only garnered $50 million in assets.  That is well below the minimum threshold needed to be considered by many institutional investors and brokerage house platforms.  My experience has been that a threshold of at least $100 million must be crossed for brokerage platforms.  That number generally goes up to $1 billion or more for retirement systems and other institutional investors.

Leaving equities, we get to the most relevant comparisons of all for most investors, gold. Technically, “Gold ETFs” are not Exchange Traded Funds (ETFs) at all because there is no actual mutual fund involved.  They are actually exchange-traded trusts of an ilk known as “grantor” trusts.  This has tax implications as the IRS regards grantor trusts as a pass-through structure.  However, the term Gold ETF has garnered public acceptance because the creation and redemption mechanism which is identical has become known as “the ETF wrapper.”  . 

The differences between an actual ETF where the “F” stands for fund and a trust using “the ETF wrapper” has tax implications. Shareholders are taxed as if they owned the underlying trust contents. In this case, it turns out that gold is taxed as a collectible which may be taxed at a higher rate than ordinary capital gains on stocks.  This is a nuance that can be very costly to high-net-worth investors if they are caught unaware.

Most investors are now aware that since January 1, 2025, the annualized total return of gold has exceeded that of the S&P 500 index.  Gold has historically had its strongest performing years when investors lose confidence in the integrity of the US stock market and/or the safety of the US dollar.  Thus far, this has been a  year in which both factors have come into play. 

Several major firms’ strategists believe that gold has only begun to shine in 2025.  In VanEck’s latest strategy piece, CEO Jan Van Eck published this chart to show gold’s dominance over all other asset classes in the past 12 months.  Mr. Van Eck notes, “Gold continues to benefit from de-dollarization. Central bank accumulation, defense uncertainty in Europe and tariff policy volatility are driving demand for an alternative to the U.S. dollar.  On the other  side of the coin, Van Eck notes, is that gold is priced near its historic highs right now and may be due for at least a short-term retracement.  Nevertheless, “Gold ETFs” has been one of the highest positive inflow categories among ETFs and there are still many investors and traders that advocate adding to current positions. 

All US ETFs offering non-hedged and non-income-augmented  (“plain vanilla”) exposure to gold are structurally identical.  They are all grantor trusts.  They all hold depository receipts representing pro rata portions of gold held in secure institutional bank vaults.   Yet even though what the shareholder receives is identical, the expense ratios of gold ETFs are far from identical. 

The six largest gold ETFs listed on US exchanges are:

1. SPDR Gold Shares (GLD)
2. iShares Gold Trust (IAU)
3. SPDR Gold Minishares Trust of Beneficial Interest (GLDM)
4. abrdn Physical Gold Shares ETF (SGOL)
5. GraniteShares Gold Trust (BAR)
6. iShares Gold Trust Micro ETF of Beneficial Interest (IAUM)

The ETF still dominating AUM, trading volume and fund inflows is the original SPDR Gold Shares (GLD) launched in 2004.  In fact, GLD is often referenced as a “generic name” for the category somewhat akin to saying “Coke” when referring to any cola drink.  When a new customer tells most personal advisors that they want to buy gold shares, more times than not he or she has bought shares of GLD. 

I have a strong personal opinion that the client is ill-served at being bought new shares of GLD at this time.  The only possible exception I can think of is if the client wishes to pursue a buy-write strategy selling covered calls given that the calls of GLD are the most liquid by far. Other than that, I counsel looking more closely at alternatives other than IAU (another older and overpriced ETF) listed above. 

SGOL and BAR were the lowest cost ETFs when launched but the SPDR Gold Minishares Trust (GLDM) of Beneficial Interest then took the title when launch in 2018 at an expense ratio of just 10 basis points (0.10%).  Three years later, iShares decided to trump GLDM by 1 basis point, issuing the iShares Gold Trust Micro ETF of Beneficial. Interest (IAUM) at an expense ratio of 9 basis points (0.09%). 

For most investors, all you need to know is that when you purchase $10,000 worth of shares of any of the six exchange-traded trusts above, that $10,000 of your overall investment portfolio is now allocated to gold.  In the interests of full disclosure, There are some minor structural differences.  The underlying assets in SDOG and BAR are 100% gold in a vault, allowing for less than 1% allocation to cash for “rounding purposes” in efficient share pricing.  The underlying assets in the other four may be, at times, as much as 20% in swaps, futures and cash.  Apparently, there are some people who sleep better at night knowing their “shares of gold” are 100% backed by bullion rather than 80% backed.  The structural differences between GLD shares and GLDM “mini-shares” are even more inconsequential.  They are held at the bank vaults of different custodian and each share of GLD represents 0.01% of a pro rata portion of gold bullion while each share of GLDM represents 0.001% of the same.  Those differences are reflected in the per-share stock price of each  That relationship is virtually identical for IAU and IAUM.  The firms cite reasons why large institutional investors should buy GLD and IAU while some smaller institutions, retail clients and their advisors may prefer the lower-priced GLDM  and IAUM respectively.  Most investors and advisors reading this article may find those differences less important than the huge fee differentials.

In summary, please consider this blog article a reference point for doing your own homework when adding to current positions following market pullbacks or diversifying your asset allocations further using midcap and global equities. Again, the main reason to do this is that the market has shifted your current asset allocations away from your target levels

Others may feel that his is more than just a cyclical change but a fundamental structure change away from dollar-denominated assets.  Those investor may want to assume or add to positions in “gold ETF” trusts.  

In all these cases, investors should be aware that although the most well-known option (SPY, MDY. IWJ, IWA and most of all GLD) may be inferior from both costs and structural purposes to newer alternatives.  Although paying 30 basis points (0.30%) more for “the brand name” may seem trivial to most investors, if you hold these assets for 20 years or more the compounding of these differentials will amount to real money.  One major difference are the Franklin country funds at just 9 basis points (0.09%) in comparison with iShares country funds at 50 basis points (0.50%).  This applies to most of the country funds which Franklin offers but I limited my comparison to two pacific rim funds to give my readers the general idea.

One important clarification on this methodology.  The emphasis on not buying new shares of the more expensive ETFs only apply to buying new shares.  This process does NOT apply to currently held shares, just purchasing new shares.  Liquidating existing positions to buy new shares of the cheaper and more efficient ETFs is not recommended.  Taxes on any capital gains will likely far outweigh the benefits from cutting costs.

Some advisory clients may wish to chat with their advisors about these differentials. There is simply no reason to pay higher expense ratios for the same exposures. Others will focus more on disciplining themselves to stay the course during this market correction which showed potential signs of abatement this week. There may be renewed reason to hope for the best.  Thanks for reading.  I wish you the best.

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