How to Invest in Lithium ETFs [2024] | Step-by-Step

Summary: As the world increasingly shifts toward clean energies, the demand for lithium is skyrocketing. With the commodity necessary for electric vehicles and renewable energy storage, lithium allows investors to capitalize on the growing need for its limited supply.  This guide will explain how to invest in lithium ETFs using a regulated online exchange, such as eToro and Interactive Brokers.

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What are lithium ETFs?

Lithium is a high-demand metal and commodity due to its essential role in rechargeable batteries, e.g., lithium-ion batteries, for electric vehicles (EVs) and renewable energy storage. Furthermore, these batteries power a variety of devices across multiple industries. The global trend of the green energy transition is driving the limited supply of lithium to increase exponentially, so the market shows considerable growth potential. Therefore, investing in lithium can be a lucrative opportunity to profit from the expanding eco-technologies sector.

Trading lithium in its physical form is complex and comes with numerous hurdles tied to the effort and logistics. Luckily for lithium-oriented investors, financial instruments like lithium exchange-traded funds (ETFs) allow market exposure without dealing with storage, logistics, and security. 

Best lithium ETFs for 2024

After detailed research, we have produced a selection of top lithium ETFs:

• Global X Lithium & Battery Tech ETF (NYSE Arca: LIT);
• First Trust Nasdaq Clean Edge Green Energy Index Fund (Nasdaq: QCLN);
• L&G Battery Value-Chain UCITS ETF (LSE: BATG).

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1. Global X Lithium & Battery Tech ETF (LIT)

The Global X Lithium & Battery Tech ETF (NYSE Arca: LIT) is one of few U.S.-based funds solely focused on the lithium energy storage market. It is a leading ETF in the lithium technology industry, with roughly half the funds invested in lithium mining companies like Albemarle (ALB) and the other half in significant battery manufacturers like Samsung (SMSN). Additionally, certain consumer goods manufacturers, such as Tesla (TSLA), are included.

Global X Lithium & Battery Tech ETF strives toward investment outcomes that correspond to the price and yield performance of the Solactive Global Lithium Index.

Global X Lithium & Battery Tech ETF price today

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2. First Trust Nasdaq Clean Edge Green Energy Index Fund (QCLN)

The First Trust Nasdaq Clean Edge Green Energy Index Fund (Nasdaq: QCLN) is a broad cross-industry ETF that covers companies involved in renewable energy but leans more heavily towards lithium batteries and the electric vehicle industry. Launched in February 2007, the ETF aims at the price and yield of the Nasdaq Clean Edge Green Energy Index. Comprising 65 stocks, including EV makers like Nio (NIO), it has benefited from lithium-reliant technology companies and remains one of the best-performing lithium-based ETFs on the market. 

First Trust NASDAQ Clean Edge Green Energy Index Fund price today

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3. L&G Battery Value-Chain UCITS ETF (BATG)

The L&G Battery Value-Chain UCITS ETF (LSE: BATG) is an ETF with goals to reflect the performance of the Solactive Battery Value-Chain Index. It is designed to track stocks focused on electrochemical energy storage technologies, electric vehicle manufacturers, and battery-related metal mining firms, such as BYD Company. Established in January 2018, it remains one of the best-performing lithium ETFs to trade.

L&G Battery Value-Chain UCITS ETF price today

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How to invest in lithium ETFs: Step-by-step

If you are curious about how to invest in lithium ETFs, follow our step-by-step guide for a quick and straightforward explanation.

Step 1: Choose a broker

To trade lithium ETFs, you first need to gain entry into the corresponding market, which you can do by using a third-party brokerage. The simplest and most effective method is using an online brokerage.

To securely invest in lithium ETFs, we recommend you consider:

1. eToro:

An investing service with a robust community of over 30 million registered accounts and outstanding features, including:

• Commission-free stock and ETF trading; 
• 2,000+ stocks from 17 exchanges;
• Fractional shares available;
• Charting tools;
• User-friendly platform.

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• Invest in 2,800+ stocks and other assets including 70+ cryptocurrencies and commodities.

• 0% commission on buying stocks - buy in bulk or just a fraction from as little as $10. Other fees apply. For more information, visit etoro.com/trading/fees.

• Copy top-performing traders in real time, automatically.

• eToro USA is registered with FINRA for securities trading.

30+ million Users

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eToro is a multi-asset investment platform. The value of your investments may go up or down. Your capital is at risk. eToro USA LLC does not offer CFDs, only real Crypto assets available. Don’t invest unless you’re prepared to lose all the money you invest.

2. Interactive Brokers (IBKR):

• 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.

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• 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

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Step 2: Open and fund your account

Once you decide on a brokerage, you should proceed to create and verify your account. Soon after you register, the investing platform will email you the precise instructions.

The next step is to prepare to invest in lithium 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

Planning your budget before you invest in lithium ETFs is crucial to your success. Staying safely within the budget limits should prevent your potential financial collapse. 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.

Step 4: Place your order and trade lithium 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 lithium 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.

Pros and cons of investing in lithium ETFs

Pros

• Diversification: Lithium ETFs on this list hold a portfolio of stocks across the lithium supply chain, from mining companies to consumer electronics manufacturers. These financial instruments provide investors with exposure to various companies involved in the commodity’s exploration and production and lithium-related technologies;
• Convenience: Lithium ETFs provide a convenient approach to benefit from the lithium market without having to buy individual stocks or physically trade the metal. Instead, they are listed on stock exchanges like regular stocks, fostering liquidity and ease of trading;
• Risk mitigation: Diversification can help mitigate risk, reducing the negative impact of poor performance by individual lithium companies. It can also reduce the effects of industry-specific challenges;
• Market trends: As the demand for lithium soars with the growth of EVs and renewable energy, lithium ETFs may benefit from broader market trends in clean energy and technology.

Cons

• Volatility: Just as with any sector-focused investment, lithium ETFs can be susceptible to market volatility. Shifts in lithium prices, regulatory changes, or geopolitical events can impact the performance of these ETFs;
• Dependency on lithium price: Lithium prices are dictated by global supply and demand market dynamics. If lithium prices fall significantly, it will hinder the financial performance of companies within the ETF;
• 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;
• New technology risks: Innovations in battery technology could shift the demand towards another commodity and make current lithium-based technologies obsolete.

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 Copper ETFs;
• How to Invest in Natural Gas ETFs;
• How to Invest in Wheat ETFs;
• How to Invest in Cobalt ETFs;
• How to Invest in Farmland ETFs.

Common mistakes to avoid when investing in lithium ETFs

Make sure to avoid these common investing mistakes:

• Lack of research: Research lithium 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 lithium ETFs