Gold Miners: ETF or Mutual Fund?

NEW YORK (TheStreet) -- Gold exchange-traded funds continue to attract investors concerned about inflation and portfolio diversification.

In particular, gold ETFs that track mining companies have garnered lots of attention by outperforming bullion-backed ETFs like the SPDR Gold(GLD Quote).

With all the interest in gold miners, it's important for investors to understand the differences between the mining ETFs. It's also important for them to know that ETFs aren't the only way to gain broad exposure to the sector.

The latest addition to the gold miner ETFs is the Market Vectors Junior Gold Miners ETF(GDXJ Quote). Its warm welcome from investors in its Wednesday debut underscores the market's interest in gold miners of all sizes.

In its first day of trading, more than 1.3 million shares of GDXJ crossed the tape. Market Vectors, which also created the Market Vectors Gold Miners ETF(GDX Quote), may have another success story on its hands.

ETFs are not the only way to access gold miners, however. As we first examined in early June, the Fidelity Select Gold (FSAGX) mutual fund offers access to many of the same firms in GDX's portfolio.

GDX and FSAGX have similar objectives and holdings. Both the ETF and the mutual fund offer exposure to larger gold mining companies. GDX and FSAGX have eight companies in common among their top 10 holdings, including Yamana Gold(AUY Quote) and Newmont Mining(NEM Quote). The funds are identical in their top two holdings: Barrick Gold(ABX Quote) and Goldcorp(GG Quote). Although their portfolio allocations are slightly different, GDX and FSAGX allocate a large percentage of underlying assets, 68.74% and 66%, respectively, to their top 10 holdings.