The Top Lithium ETFs
As time goes on, more and more investors are becoming familiar with ETFs and the inherent benefit of these more holistic approaches versus trying to beat the market straight up. Certain industries that hold a lot of promise naturally make an even better fit for an ETF, as you can put your money on a sector you believe in and therefore mitigate the chances of a single company making a mistake and dramatically harming your portfolio. With that said, one of the most exciting industries on the market, lithium, should have a set of lithium ETFs, right? Well, here’s the thing: there isn’t really a lithium miners ETF, but that doesn’t mean you’re stuck out in the cold.
In the lithium industry at the moment, there is one major lithium ETF—the Global X Lithium ETF (NYSEARCA:LIT). So in terms of finding the best lithium ETFs, it’s really not all that difficult, seeing as you only have the one choice.
But is the Global X Lithium ETF any good? As with most investments, that all depends on what you got in on the fund, but if you invested recently, you made a smart buy.
Since the fund began in 2010, the ETF has actually fallen five percent, so that’s not great news for long-term holders. But on the other hand, the fund has jumped by over 25% in 2017 alone, making it a solid performer this year with great potential to keep going up.
The Global X Lithium ETF stocks consist of a number of major players at every level on the lithium trade, from miners to refiners to companies like Tesla Inc (NASDAQ:TSLA) and Panasonic Corporation (ADR) (OTCMKTS:PCRFY). While not all these companies are lithium-based in the purest sense, they do all benefit from a growing lithium sector and, as such, they were included in this fund.
Bearing in mind that this fund is not a lithium miners ETF exclusively, the fund has performed quite well as a representative of how lithium is becoming more and more important in a number of different industries.
And lithium is one of those industries that may at any point explode into a wild upwards ride, so backing the top lithium ETFs may be one of the better investments to make in 2017.
Lithium ETF List
As far as lists go, this one’s short. After all, there’s only the one major U.S.-traded lithium ETF. So if you’re looking exclusively for the best lithium ETFs, then you’ve really only got one place to look.
And that’s where we run into a bit of trouble.
There are several key ways to invest in lithium stocks, and the top lithium ETFs consist of one ETF that pretty much tracks the industry as a whole, from lithium mining all the way to Tesla production. But, understandably, there are those out there who would rather steer clear of companies that have far more on their plate than lithium production, and instead focus on a lithium mining companies ETF. What are those people meant to do?
Well, that’s the problem. At that point, you have to essentially build your own lithium ETF stocks from the ground up, involving a good bit of legwork on your end and a solid research regimen. Not to mention the fact that you probably won’t benefit from the vast resources and tools that top ETF managers can access. But that doesn’t mean you’re out of the game.
If you’re looking for a lithium mining ETF, you can wait around for one to show up, or you can begin compiling your own. There are a few types of lithium companies that could go well in a lithium ETF stocks collection, or could be good picks for investors keen on sampling a few key lithium stocks instead of going full-on with the ETF route.
Lithium Penny Stocks
When we’re talking about lithium stocks, there are a lot of attractive companies both on the upper-end of the industry and the lower-end. With lithium being one of the more exciting industries, penny stocks can be great investments as companies can see their value skyrocket in the right conditions.
With their low cost-barrier and tremendous upside, a number of lithium penny stocks could be a great way to help you get started putting together a portfolio that represents a comprehensive investment in the industry.
Of course, penny stocks by their very nature are of the more speculative variety and therefore aren’t for everyone, but they do often have a higher capacity for larger returns, being as low-valued as they are. And the industry is certainly top-heavy, with five lithium producers controlling two-thirds of refined output in terms of volume and over 80% when accounting for value, but by no means does that exclude a few of the smaller companies from making big moves.
That holds especially for lithium mining companies, which could literally strike it rich should a land being surveyed end up revealing a higher deposit of lithium than initially projected.
It’s those types of big gain stories that attract people to penny stocks in the first place, and in an industry potentially on the cusp of a boom, you could do a lot worse than owning some lithium penny stocks.
Top Lithium Miners ETF: Include the Large Companies
As previously mentioned, a good chunk of the mining trade is dominated by the top companies in the business.
Chart courtesy of StockCharts.com
Albemarle Corporation (NYSE:ALB) is the biggest lithium stock in the world, with a market cap of $13.0-billion and a reported 35% share of the world’s lithium market.
And while bigger isn’t always better, when it comes to lithium, the adage holds true.
ALB stock is experiencing a roaring 2017, jumping up 36% since the beginning of the year on the back of a strong lithium market overall.
Which is to say that while lithium penny stocks may represent the lower and more risk-reward type of investments for any hypothetical top lithium ETFs, companies like Albemarle serve as anchors that are reliable and will grow in step with the industry as a whole considering how strong a share the biggest lithium producers currently own of the market.
Another positive is that ALB stock is diversified with a number of different ventures besides lithium going on, so it helps to have it in the mix if only for its stability, not to mention its strong upside.
But again, this is a type of stock that could fit well into a self-made ETF. The type being a big reliable lithium mining company that can help investors craft their own top lithium ETFs.
The Final Word on the Best Lithium ETFs
The state of affairs for lithium mining ETF variety isn’t great, no, but that shouldn’t dissuade investors: the industry is strong and only getting stronger.
Consider that the increasing presence of rechargeable lithium batteries and the push towards electric vehicles have spurred on demand in the lithium market by 18% per year since 2010. (Source: “Lithium: Global Industry, Markets & Outlook,” Roskill Information Services, last accessed May 15, 2017.)
Lithium batteries now make up 37% of total lithium consumption. Other uses like construction and manufacturing have declined due to increased costs that came about as battery demand increased.
And as far as electric vehicles go, there aren’t many people out there who don’t predict them being the dominant form of road transportation in the coming decades.
France, for instance, has recently announced that by 2040, no cars that run on petrol or diesel will be sold in the country. (Source: “France to ban sales of petrol and diesel cars by 2040,” The Guardian, July 6, 2017.)
The U.S. has instituted subsidies and other such incentives to help the move towards electric vehicles, and has even instituted a number of regulations that would dictate vehicle fuel efficiency for manufacturers. The most recent mandate is a requirement for automakers to field fleets with an average of 36 miles to the gallon. (Source: “Final Determination on the Appropriateness of the Model Year 2022-2025 Light-Duty Vehicle Greenhouse Gas Emissions Standards under the Midterm Evaluation,” United States Environmental Protection Agency, last accessed May 15, 2016.)
Of course, that was all done under the previous White House administration and could be rolled back, but the point remains the same. There is a definite move towards electric vehicles across the world, and lithium batteries will be a big part of that revolution if the trend holds. Seeing as how lithium batteries are becoming the preferred usage of raw lithium, it only stands to reason that all these seemingly fortuitous moves in the political and social realm are going to reflect positively on the development of the lithium industry as a whole.
Which brings us back to the top lithium ETFs. No, there isn’t much to choose from unless you attempt to assemble your own, but at the end of the day, there’s a lot to like about the lithium industry and there are a number of strong investment opportunities for the discerning buyer.
No matter how you choose to get in on the industry, whether via a self-chosen lithium mining ETF, a broader approach using the existing best lithium ETF or a few select companies, the opportunity to take advantage of a commodity on the rise is a potentially great move for 2017 investing.