Investing in Lithium
Investing in lithium and lithium investment funds
Lithium belongs to the group of alkaline earth metals and is an essential component in, for example batteries. The metal’s properties give batteries high energy density and longer durability than its predecessors. Lithium-ion batteries are the most common lithium-based batteries used in, for example:
- mobile phones,
- electric cars, and
Demand for this type of battery is expected to increase in the coming years. A major reason for this is the conversion to an electrified vehicle fleet. Most major car manufacturers today have stated that they will phase out the production of traditional internal combustion engines and switch entirely to electric propulsion. As a consequence of the increasing focus on green transformation, more investors are looking into lithium battery investments. Lithium is one of the metals where the current production rate doesn't meet expected demand until 2050, according to the IMF.
Why invest in lithium?
Lithium is one of several essential metals needed in the transition to a green and sustainable world. The electrification of our society is a strong driving force for its increased demand, which also makes the metal interesting from an investment perspective.
Why invest in lithium with AuAg funds?
- AuAg Funds offers investment solitutions that focus on providing exposure to precious metals and elements in green technology, such as lithium. What they have in common is that these assets offer protection against monetary inflation and are necessary for the transition to a green world – trends that are highly topical today.
- AuAg's funds fit well into a portfolio of traditional assets as they have low correlation with equities in particular.
- AuAg Funds invest in lithium mining through the fund AuAg Precious Green, a fund that finds the most promising lithium companies to invest in.
- Lithium investing in 2021 and 2022 has yielded solid returns, and the green transformation favours this trend.
To invest in lithium brings the following benefits to an investment portfolio
To invest in lithium brings the following benefits to an investment portfolio:
- Diversification to your portfolio.
- Getting direct exposure to the commodity itself is beneficial if you do not know which companies will build the best products from the commodity.
- By owning the commodity directly, or the companies that extract the raw material, you can get a cleaner exposure to a future price increase in the commodity.
To invest in lithium means investing in a metal with great future prospects given that demand currently outstrips supply, and is likely to continue to do so for the foreseeable future given the green technology transition.
How to invest in lithium?
There are several ways to invest in lithium:
- Stocks: Buying shares in the companies that extract the raw material.
- Funds: Invest in a commodity fund that provides direct exposure to the commodity or the companies that extract the commodity. There are different types of funds. When you invest in a fund, you pay a fee for an expert (fund manager) to select the underlying assets.
There are two types of funds:
- Daily Traded Fund: Often actively managed, which means that an expert reviews the holdings and rebalances at regular intervals.
- Exchange-Traded Fund: A basket of securities that follows an index and is traded like a stock.
Benefits of investing in lithium funds
Lithium funds or lithium investment funds typically provide:
- A diversified exposure to lithium through investments in companies active in extracting the metal, so called miners.
- A professional portfolio manager that selects the holdings of the fund and keep tracks of the market.
Lithium funds or lithium investment funds are usually daily traded and allow investors to get broad exposure to the lithium industry. Investing in funds comes with a management fee, and involves risks. Always read the fund sheet before investing.