The mining market is a multi-billion dollar global industry that has grown steadily over the last few decades. The industry itself has many pockets, but there’s one niche that has slowly inched the spotlight in the last couple of years. Due to the trade wars that began in 2018 between China and the Trump administration, rare earth mining has found itself on the hot seat. While you may not be able to invest in a rare earth metal stock directly, you can invest in a rare earth ETF—the only one that exists as of today.
What are rare earth metals?
You might be wondering why you should even bother. It’s a fair question, as rare earth and strategic metals aren’t exactly mainstream markets. But if you own Apple, Tesla, or any other shares from a modern industry, you should pay attention to the rare earth sector. According to this article, rare earth metals or elements “comprise a list of 17 elements, including the 15 lanthanides as well as scandium and ytrrium.” The list doesn’t include some of the more popular strategic elements such as cobalt or lithium, but those included in the list are substantial enough to warrant their own grouping. Chemically, these elements are soft, temperamental, and highly useful. Their name is a misnomer, since these metals aren’t actually rare on the earth’s crust. But since they are difficult to find in large concentrations, mining rare earth elements is difficult and therefore expensive. The importance of rare earth elements in the modern world is hard to grasp. Almost every modern device you will touch today will have some trace of rare earth metal. From your car to your phone to the medications that some of us might take—rare earth elements play a role in them all and more.
VanEck Vectors (REMX)
Investment management firm VanEck Vectors was founded in New York in 1955. The firm has satellite offices in Frankfurt, Germany, and Australia and was one of the first money management companies in the United States to push forward with global investing. Since 2006, VanEck Vectors has been offering Exchange Traded Products; this was when the company also launched the US’s first-ever gold mining ETF. The investing and exposure opportunities VanEck has provided US investors throughout the years have been tremendous. Today, VanEck Vectors has more than 55 ETF products, one of which is only rare earth ETF in the market—REMX. What REMX offers investors is a chance to dive into the rare metals market without the risk they would take if they were to invest in individual rare earth stocks. The Chinese has long dominated the rare earth mining industry. About 80% of the global industry’s rare earth exports come from China, while the US’ production has been negatively affected by strict regulations. Increase production of rare earth elements is important for the US market to regulate dependence on the Chinese.
Pros of investing
What REMX has shown with its structure is the stability of the ETF. Even with the Chinese – US ongoing trade war, the rare earth ETF has managed to thrive. As a matter of fact, this was likely the result of Trump’s directive to explore the nation’s Defense Production Act to improve the US’ mine development. This is a great sign for US investors looking to get in the rare earth arena, and it really makes investing now quite attractive.mApart from stability and draw, it’s highly likely that rare earth element mining isn’t going anywhere. With modern technology only on the rise, there will always be a need for rare earth mining. Today, rare earth metals are even available as physical investments that generally include secure storage in bondage warehouses. Investing in REMX would be a complete move towards the future, as is clear with its status today.
Cons of investing
As with any kind of investment, there are risks associated with investing in VanEck Vector’s rare earth ETF. For one, there are certain unpredictable aspects when it comes to the market, especially when it comes to a niche that’s reliant on natural resources. In addition, the global economic status is also a huge variable. Tariffs, quotas, trade restrictions, price manipulations, and other economic maneuvers from other foreign markets also play a role in how rare earth investments will perform.
Should you invest
It’s important to remember that VanEck Vector’s rare earth ETF is not an actual investment on metal. The equity fund tracks players in the market that include rare earth producers, refiners, recyclers, and others. This is where stability comes into play when it comes to investing in REMX. As mentioned previously, REMX has thrived even in the middle of a trade dispute. Apart from rare earth products, REMX also holds producers of other strategic metals including lithium, cobalt, tungsten, and so forth. The variability of REMX is what many investors find appealing about the equity fund. While this puts REMX in competition with a bigger market field with many other strong firms, VanEck is in a position to sell cheaper funds compared to its competitors.
In short, the fund’s future returns are looking good. Analyzing China’s rare earth production and consumption in recent years in addition to the US’ current mining deals with Canada and Australia all point to a positive and profitable future for REMX. The question of whether you should invest in REMX or not will always be a matter of preference in some way. But REMX’s portfolio is set for growth with a fund valuation that’s reasonable. So if you were seriously considering the investment, now would be the time to do it. REMX is the only rare earth ETF there is, so it's actually also the best option.
Written by Allen Lee
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