Summary: Cobalt has found extensive use in lithium-ion batteries, which are integral components in renewable energy storage and electric vehicles. As the world shifts towards eco-friendly technologies, investing in this commodity could benefit cobalt investors. This guide will show traders how to invest in cobalt ETFs using a regulated online exchange like Interactive Brokers.
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What are cobalt ETFs?
Cobalt is a hard and lustrous metal and commodity found only in chemically combined form. Like lithium, it plays an integral role in the production of rechargeable batteries for electric vehicles (EVs), renewable energy storage, and consumer electronics. Conveniently, cobalt is usually a byproduct of mining for other renewable energy-related metals, like copper. As the world hastens the transition towards green energy, the demand for cobalt shows significant growth potential. Because of this, you might want to consider investing in cobalt now.
Trading cobalt physically might not be the best option for most as it entails numerous issues with effort, transport, and security. Fortunately, investors interested in cobalt can use financial instruments such as cobalt exchange-traded funds (ETFs) to speculate on the prices of the resource without owning the resource.
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Best cobalt ETFs for 2024
After thorough analysis, we present to you a selection of top cobalt ETFs:
- Vanguard Materials ETF (NYSE Arca: VAW);
- iShares MSCI Global Metals & Mining Producers ETF (NYSE Arca: PICK).
Note
Best Platform for Worldwide Stock Trading & Investing
-
Highly trusted multi-asset broker with clients in over 200 countries
-
Trade on 150 markets globally from a single platform (stocks, ETFs, futures, currencies, crypto & more)
-
Low commissions starting at $0 with no platform fees or account minimums
-
Easily fund your account and trade assets in 26 currencies
-
IBKR pays up to 4.58% interest on cash balances of $10k or more
1. Vanguard Materials ETF (VAW)
Vanguard Materials ETF (NYSE Arca: VAW) is a broad ETF that focuses on stocks in companies that produce base materials and metals. Although not explicitly focused on cobalt, the fund does refer to copper mining companies, which usually extract cobalt as a by-product.
Although the exposure ratio to copper producers is relatively low at just 5%, the Vanguard Materials ETF gives wider exposure across the materials sector. The fund holds over 110 stocks and aims to track the performance of the MSCI US Investable Market Materials 25/50 Index.
Vanguard Materials ETF price today
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2. iShares MSCI Global Metals & Mining Producers ETF (PICK)
iShares MSCI Global Metals & Mining Producers ETF (NYSE Arca: PICK) is another broad-targeting fund that holds over 250 global mining stocks, excluding silver and gold, with several companies engaged in providing cobalt across industries.
This ETF consists of more than 250 mining stocks, including prominent companies like Glencore and BHP Group, which obtains cobalt from its copper- and nickel-refining processes.
iShares MSCI Global Metals & Mining Producers ETF price today
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How to invest in cobalt ETFs: Step-by-step
If you are curious about how to invest in cobalt ETFs, follow our step-by-step guide for a quick and straightforward guide.
Step 1: Choose a broker
Investing in cobalt ETFs requires access to the corresponding market first. Investors can simply obtain it by using a third-party investing service. The simplest and most effective option is an online brokerage.
To securely trade cobalt ETFs, we recommend you consider Interactive Brokers (IB):
- Commission-free stock trading;
- Global stock-trading on 90+ market centers;
- Fractional shares available;
- Extra income on fully paid shares;
- Lowest financing rates for margin accounts in the industry;
- No account minimum.
Best Platform for Worldwide Stock Trading & Investing
-
Highly trusted multi-asset broker with clients in over 200 countries
-
Trade on 150 markets globally from a single platform (stocks, ETFs, futures, currencies, crypto & more)
-
Low commissions starting at $0 with no platform fees or account minimums
-
Easily fund your account and trade assets in 26 currencies
-
IBKR pays up to 4.58% interest on cash balances of $10k or more
Step 2: Open and fund your account
After selecting a platform, you should create and verify your account. Immediately after you register, the investing service will email you the precise instructions.
The next step is to prepare to trade cobalt ETFs by transferring money into your account. Commonly available funding methods include bank transfers, debit or credit cards, and transaction services like PayPal.
Step 3: Decide how much you want to invest
Outlining your budget before you invest in cobalt ETFs is key to your success. Containing your investment within the budget limits should prevent a potential financial disaster. To allow for a stable and safe investment, make sure you have done the following:
- Paid off all high-interest debt, such as credit cards and personal loans;
- Created an emergency fund that covers at least three months of daily life expenses.
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Step 4: Place your order and trade cobalt ETFs
The next step is placing an order and conducting the trade. Go through the following:
- Step 1: Log into your account and find the desired cobalt ETF ticker;
- Step 2: Type in the amount you wish to purchase;
- Step 3: Select the order type (market order or limit order) and place it;
- Step 4: Confirm the trade order.
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Pros and cons of investing in cobalt ETFs
Pros
- Exposure to the cobalt market: Cobalt ETFs allow speculating on the price of cobalt without the hassle of storage, security, and logistics. This simplification can appeal to investors who want exposure to the cobalt market without the challenges of physically trading the commodity;
- Diversification: Cobalt ETFs typically invest in a variety of companies involved in the cobalt and mining industry in general, providing investors with diversification across different companies and sectors of the market;
- Risk mitigation: By investing in a cobalt ETF, you spread your principal across multiple individual stocks, reducing the impact and potential hazards of one company underperforming;
- Convenience: ETFs are publicly traded on stock exchanges, enabling easy trading through a brokerage account. This capability provides investors with liquidity and flexibility in managing their investments.
Cons
- Commodity volatility: Cobalt prices can experience substantial volatility due to supply and demand dynamics, geopolitical events, technological advancements, and other economic and non-economic factors. This volatility can impact the performance of cobalt ETFs;
- Dependency on electric vehicles: Cobalt is a crucial resource in the renewable batteries used in electric cars. Therefore, the demand for cobalt is bound to the growth of the EV market. If the EV market experiences setbacks or if the technological advances reduce cobalt usage, it could negatively impact cobalt ETFs;
- Company-specific hazards: While ETFs provide diversification, they still expose investors to the performance of individual companies within the fund, especially if a single company occupies a significant portion of the total portfolio. Poor performance by a major stock can plunge the overall ETF performance;
- Tracking error: ETFs may fail to perfectly mirror the performance of the underlying index due to fees, expenses, and trading costs. This difference in efficiency is known as tracking error.
Consider investing in more ETFs
If you are considering additional investing in ETF commodities, you can check out our other guides on this topic, including:
- How to Invest in Gold ETFs;
- How to Invest in Silver ETFs;
- How to Invest in Lithium ETFs;
- How to Invest in Copper ETFs;
- How to Invest in Natural Gas ETFs;
- How to Invest in Wheat ETFs;
- How to Invest in Farmland ETFs;
Common mistakes to avoid when investing in cobalt ETFs
Make sure to avoid these common investing mistakes:
- Lack of research: Research cobalt and ETFs that focus on it in detail before investing;
- Lack of strategy: Set your goals before you spend any money;
- Staking everything on one asset: Always diversify your portfolio;
- Falling prey to scams: Avoid illegal platforms and suspicious deals.
Disclaimer: The content on this site should not be considered investment advice. Investing is speculative. When investing, your capital is at risk.
FAQs about how to invest in cobalt ETFs
Can I buy physical cobalt instead of investing in ETFs?
Investors can buy and sell physical cobalt, but it comes with storage, transport, and security issues. Therefore, trading cobalt ETFs provides a convenient alternative.
What is the best cobalt ETF?
Our pick for the best cobalt ETF includes the following ETFs: Vanguard Materials ETF (NYSE Arca: VAW) and iShares MSCI Global Metals & Mining Producers ETF (NYSE Arca: PICK).
How do you trade cobalt ETFs?
To trade cobalt ETFs, create an account with a reputable online brokerage like Interactive Brokers, select a cobalt ETF, transfer some funds to your account, and place a buy or sell order through the platform.
Do cobalt ETFs pay dividends?
Unfortunately, most ETFs, including those related to cobalt mining, do not pay dividends.
Is trading cobalt ETFs safe?
By doing your research, making solid investing decisions, and using a regulated brokerage like Interactive Brokers, you maximize the safety and success chance of your investment.
