Show pageOld revisionsBacklinksBack to top This page is read only. You can view the source, but not change it. Ask your administrator if you think this is wrong. ====== Aberdeen Standard Physical Platinum Shares ETF (PPLT) ====== The Aberdeen Standard Physical Platinum Shares ETF (PPLT) is an [[Exchange-Traded Fund]] designed to give investors direct exposure to the price movements of platinum. Think of it as a simple, stock-market-friendly way to own the precious metal without the headache of finding a secure vault to store heavy platinum bars. This fund is what’s known as a "physically-backed" ETF, which means it doesn't just track platinum prices using derivatives or futures contracts; it actually holds physical platinum bullion in secure vaults (primarily in London and Zurich). When you buy a share of PPLT, you are buying a fractional, undivided interest in the platinum held by the trust. The goal is straightforward: to have the share price reflect the price of platinum, minus the fund's annual [[Expense Ratio]]. It offers a liquid and convenient alternative for investors looking to add a "hard" asset to their portfolio. ===== How PPLT Works ===== At its core, PPLT operates as a trust that buys and holds large bars of physical platinum. The trust then issues shares, with each share representing a claim on a small fraction of that platinum. For instance, one share of PPLT might represent roughly one-tenth of an ounce of platinum. The value of the fund's shares is intended to track the [[Net Asset Value (NAV)]] of the platinum it holds. The NAV is calculated daily based on the London Bullion Market Association (LBMA) Platinum Price. Because PPLT trades on the stock exchange like any other stock, its market price can sometimes trade at a slight //premium// or //discount// to its NAV due to supply and demand dynamics throughout the trading day. However, a mechanism involving large, authorized participants creating and redeeming large blocks of shares generally keeps the market price very close to the NAV. Investors should always be mindful of the fund's expense ratio, which is an annual fee deducted from the fund's assets to cover operating costs, slightly reducing the overall return compared to the spot price of platinum. ===== PPLT from a Value Investor's Perspective ===== So, why would a value investor, who typically hunts for cash-generating businesses, even look at something like PPLT? The answer lies in the unique role that [[Hard Assets]] can play in a portfolio. ==== The Allure of Real Stuff ==== Unlike stocks or bonds, which are financial claims, physical platinum is a tangible asset with inherent scarcity. This gives it a few potential advantages: * **Inflation Hedge:** In times of rising [[Inflation]], currencies lose purchasing power. [[Commodities]] like platinum, which have a limited supply, can hold their value or even appreciate, protecting an investor's wealth. * **Safe-Haven Potential:** During periods of economic turmoil, geopolitical instability, or market panic, investors often flee to [[Safe-Haven Asset]]s. While gold is the most famous safe haven, platinum can also serve this purpose. * **Diversification:** Because the price of platinum is driven by different factors than stocks and bonds (like industrial demand), adding it to a portfolio can provide valuable diversification. ==== Is Platinum Undervalued? ==== A value investor always asks: "Is it cheap?" With a commodity, "cheap" is relative. One popular metric is the [[Platinum-to-Gold Ratio]]. Historically, platinum has often traded at a higher price than gold due to its rarity and industrial importance. When platinum trades at a significant discount to gold, some investors see this as a signal that it may be undervalued and poised for a comeback. However, a critical distinction must be made. Classic [[Value Investing]], as taught by pioneers like [[Benjamin Graham]] and championed by [[Warren Buffett]], focuses on buying productive assets—businesses that generate earnings and cash flow. Platinum produces nothing. It just sits there. An investment in PPLT is not based on a company's ability to create value, but on the speculation that someone in the future will pay more for the metal than you did. ===== Key Considerations and Risks ===== Before jumping into PPLT, it's crucial to understand the potential downsides. * **The "No Cash Flow" Problem:** As mentioned, platinum is a non-productive asset. It pays no dividends and has no earnings. Its entire return depends on price appreciation, which is far less predictable than the long-term compounding of a wonderful business. Buffett famously critiques gold for this reason, and the same logic applies to platinum. * **Industrial Demand Cyclicality:** A huge driver of platinum's price is its use in catalytic converters for internal combustion engine vehicles. The global shift towards electric vehicles, which do not use platinum in this way, poses a major long-term structural risk to demand. Furthermore, its price is sensitive to the global economic cycle; a recession can crush industrial demand and send prices tumbling. * **Hefty Tax Bill:** This is a big one. In the United States, PPLT is structured as a grantor trust, and the IRS classifies physical precious metals as "collectibles." This means that if you hold your shares for more than a year, your profit is subject to the collectibles [[Capital Gains Tax]] rate, which is currently a hefty 28%. This is significantly higher than the long-term capital gains tax rates for stocks.