Rare earth elements are essential for everyday life today. Most people have a smartphone, a computer, a vehicle, or any other common product or device that relies on rare earth elements to be manufactured. However, as common and essential as rare earth elements are, there aren’t many investment opportunities available since you can’t invest directly in them. Investors are mostly limited to companies that mine for the elements. But there is some growing interest in ETFs specifically for the rare earth sector that we’ve taken a closer look at.
Benefits Of Rare Earth ETFs
The first European ETF in the rare earth industry is the UBS STOXX Global Rare Earth ETF. It focuses primarily on rare earth companies not located in China that earn a significant amount of income from rare earths. Investors should be aware that the ETF is managed passively and the returns that are generated are index-specific. One of the great things about this ETF is it’s available to all investors, regardless of their status or financial situation. Rare earth ETFs offer similar benefits to traditional ETFs since they are efficient, allow for reasonable market access, highly transparent, easy to trade, and are widely diversified.
Major Downside Of Rare Earth ETFs
Anytime you deal with rare earth elements as an investor, you have to think about how most global production is located in China. Upwards of 95% of rare earth element production comes from China, which not only limits investment opportunities, but also can make for risky investments. China could cut back on their exports and put other countries in serious trouble of not meeting demands from consumers. This is one reason why the stock futures of rare earth elements aren’t as promising as many investors would think since there’s so much uncertainty about the availability.
Alternatives For Investing In Rare Earth Elements
Before jumping into rare earth ETFs, it’s important to learn more about them so you have comprehensive financial knowledge on the subject. While there are some investment opportunities available, those opportunities aren’t suitable for everyone. Some alternatives for investing in rare earth elements include indexes and mutual funds. Rare earth indexes are more common since they include companies that have rare earth resources. Mutual funds in the rare earth sector are still available, but not as widely available with the emergence of rare earth ETFs.
Stock Investing Info understands the demand for investing in rare earth elements, so we stay up-to-date on the industry’s latest developments. The truth is investment opportunities in rare earth elements are limited compared to other industries, so sometimes you have to get creative with your investments. Many investors choose rare earth ETFs to diversify their portfolios rather than investing a significant portion of their investment capital in them. Rare earth elements present interesting opportunities for investors, so contact us today if you have any questions or interest in investing in them.