Investing in Metals ETFs in 2024

Metals are crucial to our economy. Industrial base metals, such as copper, iron ore, and aluminum, are essential building blocks for infrastructure, buildings, appliances, vehicles, and other equipment. Many metals are also becoming vital for lower-carbon energy. Meanwhile, precious metals like gold and silver have industrial uses and are important for investors. These demand drivers should help boost metals prices in the future. 

Investors have several metals and metal-related investment opportunities that could help them to profit from rising metals demand and prices. Of those options, exchange-traded funds (ETFs) offer an easy way to broadly invest in the metals sector. Here's a closer look at some of the leading metals-focused ETFs.

Four top metals ETFs

Four top metals ETFs in 2024

There are lots of ETFs focused on the metals and mining sector. Several ETFs focus on precious metals, including gold ETFs and silver ETFs. They provide investors with broad exposure to the precious metals mining sector or a specific precious metal.

Likewise, several ETFs concentrate on leading industrial base metals, such as aluminum, iron ore, and copper, plus emerging metals for the green energy sector such as lithium. Their strategies center on holding metals-focused mining stocks or metals futures contracts.

Here are some of the top ETFs focused on non-precious metals (check out this article for a list of precious metals ETFs):

SPDR S and P Metals and Mining ETF

1. SPDR S&P Metals & Mining ETF

The SPDR S&P Metals & Mining ETF seeks to provide investors with exposure to metals and mining stocks in the S&P Total Market Index. It holds shares of mining companies in the following subsectors of the metals and mining sector: Aluminum, coal and consumable fuels, copper, diversified metals and mining, gold, precious metals and minerals, silver, and steel. The ETF had 32 holdings as of early 2024, led by the following five:

• Freeport-McMoRan (FCX 1.06%): 5.4% of the fund's holdings
• Alcoa (AA -2.05%): 5.1%
• Newmont (NEM 12.8%): 4.9%
• Carpenter Technology (CRS 0.03%): 4.7%
• MP Materials (MP 0.64%): 4.7%

The ETF uses an equal-weight strategy, which provides investors with targeted exposure to the entire U.S. metals and mining sectors, including precious metals. It charges a relatively low ETF expense ratio of 0.35%. The ETF is ideal for people seeking an investment focused on the U.S. metals sector.

2. iShares MSCI Global Metals and Mining Producers ETF

2. iShares MSCI Global Metals & Mining Producers ETF

The iShares MSCI Global Metals & Mining Producers ETF offers investors targeted access to the global metals and mining industry, minus precious metals. The ETF held shares of 218 mining stocks as of early 2022, led by the following five:

• BHP Group (BHP -3.27%): 14.6% of the fund's holdings
• Rio Tinto (RIO -0.79%): 6.6%
• Vale (VALE -2.87%): 5.7%
• Freeport-McMoRan: 5.5%
• Anglo American (AAL 16.1%): 5.1%

The ETF takes a market-weighted approach to the global non-precious metals mining sector. It charges a reasonable expense ratio of 0.39%. The fund's features make it ideal for people seeking to invest in an ETF weighted toward the largest non-precious metals miners in the world.

3. VanEck Rare Earth/Strategic Metals ETF

3. VanEck Rare Earth/Strategic Metals ETF

The VanEck Rare Earth/Strategic Metals ETF provides investors with targeted exposure to companies focused on producing, refining, and recycling rare earth and strategic metals and minerals. The ETF held shares of 33 rare earth and strategic metals companies as of early 2024, led by the following five:

• Albemarle (ALB -1.61%): 7.3% of the fund's holdings.
• Pilbara Minerals (PLS 1.31%): 7.3%
• China Northern Rare Earth Group: 6.8%
• Lynas Rare Earths (LYC -0.31%) 6.5%
• MP Materials: 5.5%

The ETF allows investors to own a basket of companies focused on mining materials that are important for the technology and green energy sectors. It charges a modest fee of 0.54% for access to these emerging metals.

4. Invesco DB Base Metals Fund

4. Invesco DB Base Metals Fund

The Invesco DB Base Metals Fund enables investors to invest in commodity futures in a convenient and cost-effective way. The fund focuses on some of the most liquid and widely used base metals, such as aluminum, zinc, and copper. As of early 2024, the fund's holdings were:

• Copper futures: 34.7% of net assets
• Aluminum futures: 33.5%
• Zinc futures: 32.6%

The ETF uses leverage and collateralizes futures contracts with U.S. Treasury bills and other Invesco products built around government debt.

The fund is somewhat speculative since futures contracts can be very volatile. It charges investors a modest expense ratio of 0.77%. The ETF is best for sophisticated investors who want to make a short-term trade on the thesis that base metals prices will rise sharply in the near term.

Pros and cons

The pros and cons of metals ETFs

Investing in metals and metals ETFs isn't for everyone. Investing in the sector has several pros. A big one is that rising demand for metals tends to drive up prices over the long term. That provides investors with the opportunity to make money on the metals market. Metals can also be a good way to hedge against inflation. Investing in metals ETF enables investors to broadly invest in the thesis that metals prices will rise.

However, metals have drawbacks. Prices can be volatile, especially during an economic downturn. Meanwhile, they often aren't a perfect hedge against inflation, so investors need to carefully consider whether investing in a metals ETF is right for their situation.

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