You'd think a couple of billionaires like Paulson and Soros could choose the right gold ETF.

It seems like every quarter when hedge fund 13F filings are released, we get stories about how John Paulson or George Soros upped their stake in GLD.

The question I wonder about is, Why?

I'm in no position to question the logic behind Paulson's, Soros' or even the Teacher Retirement System of Texas' investments in gold. These people have already forgotten more than I will ever know about the market.

That said, I feel qualified to question the choice of ETF they use to get that exposure.

After all, I have spent the past two years working on our ETF Analytics tool, which helps investors do just that: choose the best ETF for the exposure they are seeking.

Armed with the insights I've culled, it boggles my mind that such sophisticated investors with such massive positions would buy the SPDR Gold Shares (NYSEArca: GLD) when a cheaper, nearly as-liquid alternative exists in the iShares Gold Trust (NYSEArca: IAU).

In fact, the continued use of GLD instead of IAU is a great example of how individual investors may be too focused on a name brand.

The posted expense ratio for GLD is 40 basis points, while the holding cost for IAU is just 25 basis points.

This may seem like a trivial amount, but when you start to scale up to the asset tallies Paulson & Co. and Soros Fund Management are dealing with, you get a better picture of just how dramatic the savings can be.

It would seem that Paulson, and, to a lesser extent, Soros are flushing money down the drain in holding GLD as opposed to IAU. The two funds offer identical exposure, but one is 15 basis points cheaper.

On an annual basis, based on the most recent 13F filings with the Securities and Exchange Commission from the two, Paulson is forfeiting more than $5 million in annual holding costs and Soros nearly $200,000.

Of course, once you incorporate trading costs, the savings decline, but even with a spread of 6 basis points, using IAU would save Paulson nearly $2 million.

Paulson in particular may want to heed my advice considering that Citi Private Bank decided to pull $410 million from his hedge fund, according to a Reuters article that noted the redemption was first reported by Bloomberg News.

What makes this even more perplexing is the fact that both Paulson and Soros are trading this in blocks of 25,000 shares or more.

Based on our proprietary measure of block liquidity that we developed with Knight Capital, both funds are cheap and easy to trade with the help of market makers or liquidity providers.

This may not be what most retail investors want to hear, but these guys are in a much better bargaining position than retail investors as well, considering the scale of their positions.

Heck, Paulson's position alone represents nearly 5 percent of GLD assets, and would constitute more than a third of IAU's current asset tally.

The fact that these guys may be able to negotiate favorable creation or redemption fees from the issuer may be the wizard behind the curtain and may explain why both funds have focused on GLD as opposed to the more cost-effective IAU.

As I said before, these guys are far too smart to not catch something like this.

Still, they illustrate just how easily investors can be distracted by a well-known name brand, which in this case is GLD.

We see it all the time here, whether it be the iShares MSCI Emerging Markets Index Fund (NYSEArca: EEM) versus the Vanguard MSCI Emerging Markets ETF (NYSEArca: VWO) or with the SPDR S&P 500 ETF (NYSEArca: SPY) versus the Vanguard S&P 500 ETF (NYSEArca: VOO).

The bottom line is that it's hard enough to generate the performance needed to outpace inflation and secure retirement.

So, there's no need to further handicap yourself by choosing an unnecessarily expensive ETF, no matter how familiar the name.

Maybe it just takes two billionaires making the same mistake to show how big this mistake can be.

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