Best Lithium Battery ETFs to Buy & Hold Forever

Aug 19, 2022 09:58 AM ET
Best Lithium Battery ETFs to Buy & Hold Forever

Lithium batteries have been around for a while, but they've become increasingly popular in recent years thanks to the rise of electric vehicles. These ETFs provide exposure to companies involved in designing, manufacturing, and selling lithium batteries. 

Some of the more well-known firms consuming Li batteries include Panasonic, Tesla, LG Chem, and Samsung SDI. Investing in a lithium battery ETF can be a great way to enter this growing industry. Electric vehicles are becoming increasingly popular, and as demand for these vehicles increases, so will the need for lithium batteries. 

Before selecting a lithium ETF for investment, investors thoroughly research the fund's performance. As you plan on holding long-term, it is better to diversify your capital into multiple instruments. A poor output from one will not drastically affect your gains.

What is ETF?

An ETF, or exchange-traded fund, is a type of investment fund that trades on a financial exchange. ETFs are similar to mutual funds in that they provide entry to a wide range of investments and are more like stocks in that they can be bought and sold throughout the day. 

ETFs often track indexes such as the S&P 500, but they can also be used to invest in specific sectors or asset classes. For example, some ETFs focus on gold, real estate, or foreign stocks. Some ETFs are even designed to provide inverse exposure, meaning they gain value when the market falls. These instruments have become increasingly popular due to their flexibility and low costs. 

Many investors use ETFs to build diversified portfolios without purchasing individual stocks or mutual funds. And because ETFs trade on exchanges, they can be easily bought and sold without going through a broker. However, it's important to remember that ETFs still carry risk; for example, if the underlying investments fall in value, the ETF will likely do so. Our article will cover all the possible lithium ETFs that can prove to be an excellent investment in the future.

How to invest in lithium ETF?

A lithium ETF is an exchange-traded fund that invests in companies involved in the lithium industry. This can include miners, producers, and manufacturers of lithium-based products.

One advantage of investing in a lithium ETF is that it offers exposure to the entire lithium market. This can be helpful if you're not sure which specific companies or stocks to invest in. Another advantage is that ETFs are often more liquid than individual stocks, making them easier to buy and sell.

Before investing in a lithium ETF, research the fund and its holdings. You'll also want to consider the fees associated with the fund. The ETF is available on designated brokers, where you can sign up and invest as needed. The process can be simplified in the following points:

  1. Select an ETF of your choice

  2. Find a trustworthy broker or an exchange on which it is available to trade

  3. Sign up on the respective brokerage by providing your personal details, email and password

  4. Verify your identity as per the requirements and fill out the tax form if needed

  5. Place a buy order according to your analysis to receive ETF shares

Do not forget to manage your psychology and use a solid strategy to avoid facing high drawdowns. Avoid trading when you have feelings of greed, happiness, and anger. Over-trading is also one of the common enemies of many traders. Leave the trading floor when you have met your daily or monthly goals. If you stick for too long, you may give up your profits back to the market.

How does an ETF make money?

ETFs, charge investors an annual management fee, similar to mutual funds. This fee is typically much lower than the fees charged by actively managed mutual funds.

ETFs may also generate income from the underlying assets they hold. For example, a bond ETF can earn interest from the bonds, and a stock ETF may earn dividends from the stocks it owns. This income is then distributed to shareholders.

Capital gains are also available when the assets under hold are sold for more than they were purchased for. As with the second option, the profits are distributed to shareholders.

What is the expense ratio in ETF?

An ETF's expense ratio is the annual fee that all shareholders pay to cover the fund's operating expenses. The vast majority of ETFs have an expense ratio of 0.40% or less, which is quite low compared to other investment options. However, there is a handful of ETFs with expense ratios above 1.00%. 

The expense ratio is important because it will impact your overall returns. A higher expense ratio means that more of your investment will cover the fund's expenses, which leaves less for you. 

How to choose which ETF to buy?

While picking an ETF, there are a few key things to keep in mind. First, consider your investment goals. Are you looking to simply track the market or beat it? There are ETFs for both purposes.

Next, take a look at fees. Many ETFs have expense ratios of 0.20% or less; however, some can be much higher. 

Research about the underlying index that the ETF tracks. Some indexes are more volatile than others, so picking an ETF that will fit your risk tolerance is essential.

Also, check out the returns for the past 3 or 5 years. This will give you a general idea of the funds' performance and future expectancies.

Pick the solid issuer

One of the most important considerations when investing in ETFs is finding a solid issuer. There are a few ways to research this, but one of the simplest is to look up the company online. If an issuer has a lot of negative reviews, the management is not transparent, the registration of funds happened somewhere in offshore jurisdictions -  it's probably best to avoid them.

Second, you'll want to ensure that the issuer has a good track record. Look at their performance over the past few years to see how their ETFs have performed. If an issuer has a history of poor performance, it's best to avoid them.

Third, ensuring that the issuer has a good selection of ETFs is vital. They should offer a variety of ETFs so that you can find one that fits your investment goals. The companies within the portfolio should be included in the publicly listed stock exchange and have a reasonable market cap.

Fourth, you'll want to confirm that the issuer has a good reputation for customer service. This means that if you have any questions or problems, you'll be able to get in touch with someone who can help you.

Check the assets under management (AUM)

A larger fund will generally be more liquid, meaning you'll be able to buy and sell shares more easily. They're also typically managed by a team of professionals, which can help keep expenses low.

However, it's not always the case that bigger is better. Smaller ETFs can offer investors access to niche markets that may be less efficiently priced. And because they're less well-known, they may be less crowded and provide more potential for outsize returns.

Look at the ETF expense ratio

It is best to choose an ETF with a low expense ratio so that more of your money is going towards actual investments. Generally, most lithium ETFs have 0.3-0.7% expense ratios. 

Explore the ETF top 10 holdings

The top 10 ETF holdings clearly show where the fund focuses its significant capital. Take a note of the percentage of money invested in each company. 

What is the best lithium ETF to buy and hold forever:

 

Several lithium ETFs are on the market, but not all are created equal. Let us look at the best options for long-term investors looking to profit from the expected lithium demand boom.


Amplify Lithium and Battery Technology ETF (BATT)

Since its inception in 2018, the Amplify Lithium and Battery Technology ETF has traded on the NYSE stock exchange. The fund tracks the outcome of the EQM Lithium & Battery Technology Index. The investment strategy involves putting in 80% of the total cash in the securities included within the index. 

The ETF includes all those listed publically listed companies with nearly 50% of revenue generated from lithium production. The firm should also have 10% of the global market share in lithium. It should be listed on a regulated stock exchange and have a minimum market cap of $500 million.

The BATT ETF started trading with a value of $20.29 in its opening. The ETF gradually lost its weight over 1.5 years and fell to $5.91 on 02 March 2020. However, the setback was temporary, and the fund regained its value on 01 November 2021 by forming a new high at $20.78. The point served as a major resistance that it failed to cross. As of writing, the ETF is trading at around $15. 

The issuer

EQM indexes are the issuer of the Amplify Lithium and Battery Technology ETF. It is listed as BATT on the NYSE.

Assets under management (AUM)

As of writing, the ETF has a total of $177,851,682 in net assets with 12,700,000 outstanding shares.  

BATT ETF expense ratio

The expense ratio of BATT is currently at 0.59%.

BATT ETF top 10 holdings

The top 10 list of holdings include:

  • CONTEMPORARY AMPER 9.83%

  • BYD COMPANY LTD 6.08%

  • TESLA INC 6.03%

  • BHP GROUP LTD 5.42%

  • GLENCORE PLC 3.66%

  • LI AUTO INC 2.52%

  • NIO INC 2.25%

  • YUNNAN ENERGY NEW 2.13%

  • EVE ENERGY CO LTD 2.13%

  • RIVIAN AUTOMOTIVE INC 2.00%

Global X Lithium and Battery Technology ETF (LIT)

Globally X Lithium and Battery Technology is a relatively old ETF. It was founded on 22 July 2010 and has a total of $4.35 billion in assets under management as of now. A company must have a Free Float Market Capitalization of $50 million to be considered eligible for entry. It should be listed on a regulated stock exchange and have a mean daily trade value of over $200000 for the past three months.

Annual reviews and rebalance reports are concluded thoroughly and are available to the general public. Currently, the ETF caps the total number of members at 30% for satisfying the listing requirements of Shanghai Stock Connect (SSE) and Shenzhen Stock Connect (SZSE). It has a total of 39 holdings and is primarily traded on the NYSE exchange. The average annualized return of 10 years is 10.88%.

The LIT ETF has seen a sudden boost in its value in recent years, probably due to the increasing demand and the importance of lithium. It broke the previous resistance level of $44 with force and went to the top charts. As with BATT, the ETF faces a slight pullback resting at 61.8% Fibs. 

The issuer

LIT belongs to the family of Global X Funds.

Assets under management (AUM)

The ETF has $4.35 billion in AUM as of now.

LIT ETF expense ratio

The total annual expense of the fund is 0.75%.

LIT ETF top 10 holdings

The top 10 holdings of LIT are:

  • ALBEMARLE CORP 10.04%              

  • EVE ENERGY CO LTD-A 6.93%

  • YUNNAN ENERGY-A 5.89%

  • BYD CO LTD-H 5.87%

  • CONTEMPORARY 5.79%

  • GANFENG LITHIUM CO LTD 5.77%

  • QUIMICA Y-SP ADR 5.08%

  • LG CHEM LTD 4.88%

  • PANASONIC HOLDINGS CORP 4.46%

  • TDK CORP 4.34%

VanEck Vectors Rare Earth/Strategic Metals ETF (REMX)

VanEck ETF was founded on 27 October 2010. The Exchange Traded Fund tracks the performance of MVIS®Global Rare Earth/Strategic Metals Index (MVREMXTR) with a physical ETF structure. Peter Liao is the CFA, while Guo Hua is the fund's portfolio manager and equity analyst.

Over the last ten years, the fund has seen a fair share of ups and downs. It started trading at $246 since its launch. The price has gradually faded to around $80 as of writing. 

The issuer

State Street Bank and Trust Company is the current custodian of the VanEck Vectors Rare Earth/Strategic Metals.

Assets under management (AUM)

The ETF holds $720.7 million in AUM.

REMX ETF expense ratio

For the shareholder, the expense ratio of the ETF is 0.53%.

REMX ETF top 10 holdings

The following list of companies have the current top 10 holdings of REMX:

  • ZHEJIANG HUAYOU COBALT CO LTD 10.22%

  • CHINA NORTHERN RARE EARTH GROUP HIGH-TE 7.91%

  • SHENGHE RESOURCES HOLDING CO LTD 7.03%

  • LYNAS RARE EARTHS LTD 6.66%

  • ALLKEM LTD 6.10%

  • PILBARA MINERALS LTD 6.02%

  • GANFENG LITHIUM CO LTD 5.39%

  • XIAMEN TUNGSTEN CO LTD 5.05%

  • MP MATERIALS CORP 4.51%

  • TRONOX HOLDINGS PLC 4.21%

ETFS Battery Tech & Lithium ETF (ACDC)

ACDC is a relatively new fund in the market. It was created on 30 August 2018 and has provided a total return of 21.17%. The ETF tracks the performance of the Solactive Battery Value-Chain Index and allows investors to cash in with a minimum amount of $500. International equities comprise 89.23%, while Australian equities constitute 10.60% of the total asset allocation.

To stay on par with the eco-friendly statures, the index only includes companies with less than 25% of their revenue in oil or gas. Free-float capitalization of at least US$200 million and a three-month daily trading average of US$1 million is the minimum eligibility to be included in the ETF.

ACDC price action chart shows a similar pattern as with LIT. Within 4 years, the fund had nearly doubled its value if not for the pullback, which is eminent with all the lithium stocks. The ETF faced a significant resistance near $100 and is now trading at around $70. 

The issuer

ANZ ETFS Management (AUS) Ltd is responsible for looking over the ETF.

Assets under management (AUM)

The total value of AUM is $470.23 million.

ACDC ETF expense ratio

The annual management costs of the fund are 0.69%. It is traded from 10 AM to 4 PM.

ACDC ETF top 10 holdings

The top 10 holdings of the ETF are:

  • BYD CO LTD-H 5.8%

  • SOLAREDGE TECHNO 4.7%

  • DELTA ELEC 4.6%

  • NGK INSULATORS 4.3%

  • LG ENERGY SOLUTI 4.2%

  • SUMITOMO ELEC IN  4.1%

  • RENAULT SA 4.1%

  • TAIWAN CEMENT 4.0%

  • NISSAN MOTOR CO 4.0%

  • ABB LTD-REG 4.0%

So Should you buy lithium ETF?

Companies that mine or produce lithium can be more volatile than ETFs, as their share prices are more closely tied to the cost of lithium itself. However, these companies also offer the potential for greater returns if the price of lithium rises. On the other hand, lithium ETFs provide better stability, as they typically hold a basket of different stocks. This diversification can help protect your investment if lithium prices fall.

Ultimately, there is no right or wrong answer when deciding whether to invest in a lithium company or a lithium ETF. It depends on your individual goals and risk tolerance. An ETF may be the better choice if you're looking for stability. 

ETF Investing Pros

There are several advantages to investing in ETFs, which include:

  • Access to a wide range of asset classes: ETFs offer investors exposure to a broad range of asset classes, including stocks, bonds, commodities, and more. This can provide greater diversification and help mitigate risk.

  • Low costs: ETFs typically have lower fees than traditional mutual funds, making them more affordable for investors.

  • Flexibility: ETFs can be used to implement various investment strategies, such as indexing, sector rotation, and more. This makes them an ideal tool for both long-term and short-term investors.

  • Tax efficiency: ETFs tend to be more tax efficient than traditional mutual funds, meaning investors can keep more of their profits.

  • Liquidity: ETFs are generally highly liquid, making them easy to buy and sell. The good volume can be helpful in various situations, such as when you need to raise cash quickly or rebalance your portfolio.

  • Future prospects: Lithium demand is expected to increase considerably by 2030, which will undoubtedly impact the Net Value of the companies producing the metal. After a good jump in the stock value, we can expect the ETFs to take a hike as well.

ETF Investing Cons

There are a few potential drawbacks to ETFs as well, such as:

  • Expenses: While ETFs have lower expense ratios than traditional mutual funds, they still have fees. These can eat into your profits over time, so it's essential to be aware of them.

  • Complicated structures: Some ETFs have complex structures that can be difficult to understand for novice traders. This can make it hard to know exactly what you're investing in and how it will perform.

  • Lack of personalization: ETFs offer less customization than other investment options, such as stocks and mutual funds. Finding an ETF that perfectly suits your needs can be challenging.

Summary

Overall, ETFs offer investors a cost-effective way to gain exposure to various asset classes. And, because they are typically more tax-efficient than mutual funds, they can provide investors with a way to boost their returns. The high liquidity can help them get in and out of the markets as per requirements with minimal slippages.

Lithium ETFs are a great way to invest in the growing lithium industry. Investing in a lithium battery ETF could provide you with many profitable opportunities. All of the ETFs on our list have performed nearly average or above over the past year. However, investors should conduct thorough research before investing in an ETF. Never put all of your investment in a single asset.

 



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