Investing in Rare Earth Metals
Investing in rare earth metals funds
Rare earth metals funds invest in companies that extract so-called rare earth metals. Investing in rare earth metals exposes the investor to the green transformation as these metals are essential in many green-tech applications.
The rare earths are 17 metallic elements located in the middle of the periodic table. These metals have unusual fluorescent, conductive, and magnetic properties—which make them very useful when alloyed, or mixed, in small quantities with more common metals such as iron. Because they are used in wind turbines and electric vehicles, these elements are also critical to the world's green transformation.
Many rare earth metals have a high demand due to their use in green technologies such as electric vehicle batteries and wind turbines. Some of these are Neodymium, Praseodymium, Terbium och Dysprosium.
Benefits of investing in rare earth metals funds
There are both benefits and risks involved when investing in rare earth metals. These are described further below.
At the moment, investors can't buy futures for rare-earth elements as they can with other commodities such as gold, copper, wheat or corn. It can also be difficult to know what to look for when selecting a specific mining company to invest in. Therefore, investors can seek exposure to the rare-earth industry using more conventional means, such as investing via rare earth metals funds or ETFs.
A couple of benefits of investing in rare earth metals funds are:
- Broad exposure: They typically give broad exposure to a range of companies extracting rare earths as a subset of their total mining activities. They could include platinum mining companies and other miners primarily focusing on gold and silver.
- Managed portfolio: An expert (portfolio manager) keeps track of the holdings in the fund to make sure that investors get the best exposure to rare earth metals.
- Diversification: Investing in a rare earth metals fund can be a good diversification to a portfolio that already invests in gold and silver.
There are also several risks involved in investing in rare earth metals funds:
- Price volatility: The metal prices are, like many commodities, somewhat volatile. It is important to understand the risk exposure of the fund before investing.
- Mining jurisdiction: Today, most rare earth metals are extracted by privately or locally listed companies in China. An investor needs to understand which jurisdictions the fund is investing in to understand the full risk profile of the fund.
AuAg Funds does not invest in rare earth metals mining companies based in high-risk jurisdictions, such as China, Russia and Africa, but instead focuses on jurisdictions such as Australia and North America.
How to invest in rare earth metals funds
There are different ways to invest in rare earth metals and rare earth metals funds. In this section, we'll focus on different types of funds that give exposure to these metals:
Daily Traded Funds: Daily traded rare earth metals funds typically offer rare earths as part of a larger portfolio of mining stocks. These can be traded through conventional fund platforms.
Exchange-Traded Funds: There are also ETFs offering rare earth exposure. ETFs or exchange-traded funds are traded much like a regular stock, offering intraday pricing and dealing.
Through the fund AuAg Essential Metals, investors get exposure to a metals mining fund that holds rare earth metals. Investing in rare earth metals via this fund gives exposure to a broad basket of mining companies that extract metals such as copper, lithium, and nickel.
Why invest in rare earth metals with AuAg funds?
- AuAg Funds offers funds that provide exposure to precious metals and green tech elements. They have in common that these assets provide protection against monetary inflation and are necessary for the transformation to a green world – trends that are highly topical today.
- By investing in AuAg Essential Metals, investors get access to mining companies that extract rare earth metals.
- AuAg's funds fit well into a portfolio of traditional assets as they have a low correlation with equities in particular.
- AuAg offers exposure to companies that create green technology from rare earth metals through the fund AuAg Precious Green. The fund has 60% of the fund's exposure to green tech companies in four different areas; production of clean energy, reduced energy consumption, energy storage/power and extraction of the elements needed for the green transition.