Commodities, basic materials, and metals are hot right now. The pandemic has put severe stress on global supply chains, and demand for tech devices (everything from semiconductors to electric vehicles) is soaring. Add in Russia’s invasion of Ukraine, and the price of many elemental materials is quickly rising.
Nickel is included. The price of nickel has almost doubled since the start of 2019 even though the metal has cooled off a bit from all-time highs reached in early 2022. A key ingredient in all sorts of manufacturing and leading technology, nickel could be a good investment over the next decade.
However, investing in commodity stocks such as nickel mining can be tricky. That’s where investing in a nickel ETF can be a good fit.
Investing in nickel ETFs
Nickel production companies are highly volatile and sensitive to changes in supply and demand. Investing in individual nickel stocks isn’t for the faint of heart.
Nevertheless, demand for nickel is strong. The elemental metal is one of the most prevalent resources on the planet and is used extensively in manufacturing -- as an ingredient in stainless steel, for example. Technology such as semiconductors and electric vehicle batteries are also expanding and gobbling up more nickel. Investing in a well-diversified ETF (exchange-traded fund) made up of nickel and nickel companies might make sense right now.
With that in mind, here are four ETFs that provide investors with exposure to nickel:
|Assets Under Management
|iPath Series B Bloomberg Nickel Subindex Total Return ETN (NYSEMKT:JJN)
|An ETN that uses futures to follow the market price of nickel.
|SPDR S&P Metals & Mining ETF (NYSEMKT:XME)
|A basket of metal production and mining stocks.
|iShares MSCI Global Metals & Mining Producers ETF (NYSEMKT:PICK)
|A diversified mix of mining operations, including nickel miners.
|Global X Disruptive Materials ETF (NASDAQ:DMAT)
|A new ETF that invests in metal mining and rare earth element producers.
1. iPath Series B Bloomberg Nickel Subindex Total Return ETN
A good place to start a search for a nickel ETF is with the iPath Series B Bloomberg Nickel Subindex Total Return ETN. The purpose of this fund is to follow the price of nickel futures contracts, which will roughly mimic the market price of nickel over time. The fund (technically the notes since ETN stands for exchange-traded notes) charges 0.45% annually, which works out to $4.50 in fees deducted per year for every $1,000 invested.
The iPath Series B Bloomberg Nickel Subindex Total Return ETN is one of the best ways to get direct exposure to the price of nickel. However, it comes with some downsides. Since the investment utilizes futures contracts rather than buying the commodity itself, it won’t perfectly match market prices for nickel. In fact, due to turnover of the futures contracts, there will be periods of time when the ETN will underperform nickel prices on the open market.
Nevertheless, if pure exposure to nickel is what you’re after, this investment might be up your alley.
2. SPDR S&P Metals & Mining ETF
If nickel and other metal production stocks are more your speed, then the SPDR S&P Metals & Mining ETF is worth a closer look. The ETF manages $2.1 billion in investor funds and charges just 0.35% in annual fees. The fund contains 33 stocks that make up the S&P metals and mining subindex. The fund is equal-weighted to all of the holdings.
More than 40% of the portfolio is made up of steel stocks. Since nickel is a key ingredient in steel, especially stainless steel, the stocks can provide an investment portfolio with exposure to nickel and its use in industrial applications. Another 10% of the portfolio is composed of diversified mining companies. Top stocks in the SPDR S&P Metals & Mining ETF include steelmakers Nucor (NUE 1.79%), Steel Dynamics (STLD 1.79%), and Cleveland-Cliffs (CLF 0.95%).
3. iShares MSCI Global Metals & Mining Producers ETF
The iShares MSCI Global Metals & Mining Producers ETF has a more specific focus on metal mining companies, which are operations that extract base materials from the earth. Half of the fund is made up of mining stocks, with another one-third composed of steelmaker stocks.
This is also a much more diversified fund and features 251 stocks as of this writing. Top holdings include nickel miners such as BHP Group (BHP -0.09%), Glencore (OTC:GLNC.Y), and Vale (VALE -0.3%). iShares MSCI Global Metals & Mining Producers ETF manages $1.3 billion in investor funds and charges 0.39% per year in fees. In addition to providing an investment in nickel and other diversified metal operations, the ETF also pays a high dividend for investors looking for income.
4. Global X Disruptive Materials ETF
This is the newest fund on this list. Global X launched its Disruptive Materials ETF in January 2022 to take advantage of booming demand for rare earth elements and other metals, including nickel. As a new fund offering, the Global X Disruptive Materials ETF only manages $4 million in investor funds as of this writing. It charges 0.59% per year.
The mining and metal producers in the ETF were picked because they are suppliers for leading disruptive technology companies such as semiconductor and battery manufacturers, renewable energy project developers, and 3D printing companies. Top nickel producers such as Anglo American (OTC:NGLO.Y) feature prominently in the ETF, as do lithium producers (another base material used in batteries). Stocks based outside of the U.S. -- China in particular -- make up the bulk of the portfolio, introducing extra risk for U.S.-based investors in the form of foreign currency exchange and geopolitical risks.
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Nickel ETFs provide industry diversification
For investors who want to introduce nickel production and any potential growth from the metal mining industry to their portfolio, a nickel ETF can help provide some diversification. However, this diversification is only at the industry level and provides limited safety from individual company stocks going haywire and upending overall investment performance.
Bear in mind that nickel prices and mining in general can be a volatile space. A nickel ETF should be paired with an assortment of investments from other industries and various investment classes to achieve true portfolio diversification.
Nevertheless, nickel is a promising investment theme that’s worth some research. With top technologies heavily relying on this elemental metal, it could provide healthy returns over the next decade.