Smart Beta Gold Miner ETF Options

With gold prices back to one-month highs, investors may consider alternative index-based gold miner ETFs to capitalize on the strengthening bullion.

The Sprott Gold Miners ETF (NYSEArca: SGDM) has increased 77.6% year-to-date while the Sprott Junior Gold Miners ETF (NYSEArca: SGDJ) advanced 110.1%.

Unlike traditional market cap-weighted funds, SGDM and SGDJ follow a factor-based or smart-beta indexing methodology that can potentially enhance returns.

Specifically, SGDM follows mid- to large-cap gold miners but the underlying index weights components based on quarterly revenue growth on a year-over-year basis and the quality of its balance sheet as measured by long-term debt to equity.

By focusing on balance sheet strength, the fund has greater exposure to companies with lower long-term debt to equity ratio, which have a greater ability to weather potential downturns.

The underlying index provides a “Transparent, rules-based methodology designed to overweight gold stocks with attractive investment merits relative to the other stocks in the index,” according to Sprott.

Additionally, SGDJ tracks small-cap gold miners but weighs its components based on revenue growth and price momentum.


Unlike SGDM, SDGJ focuses on price momentum, which helps identify leading junior gold miners driven by factors like new discovery, mine development or joint ventures.