Investing in Rare Earth Elements: A Strategic Move for the Future

After the 2010 rare earths supply scare, companies and investors began devising drastic plans. Some suggested opening the Amazon rainforest for mining or exploring sea floor or even mining the Moon for rare earth metals.

Modern experts believe rare earth elements are essential to high-tech applications like 5G mobile communication standards and modern X-ray imaging technology. Investors can gain exposure to this market via ETFs that track them.

1. Invest in Mining Companies

Mining companies supply materials essential to many of today's essential technologies, from quantum computing and green tech to medical applications and quantum entanglement. Mining firms also play a vital role in efforts to reduce greenhouse gas emissions in order to avert catastrophic climate collapse; wind farms will increase demand for motor materials like neodymium and dysprosium while moving away from fossil fuels will increase lithium and nickel batteries sales.

United States efforts to regain prominence in the rare earths market have proven unsuccessful in the past, including attempts at building mines and separation facilities to rival China's. Unfortunately, such attempts were hindered by high costs and geopolitics; Chinese efforts included efforts to limit foreign ownership of American companies using rare earth elements.

Investors seeking mining companies with diverse reserves in order to reduce risk and exposure in specific regions or countries. It is also wise for them to look out for companies with larger size as these tend to have more stable revenue streams and a broader customer base.

Researchers should conduct extensive research on any commodity they're considering investing in as well as companies directly competing or providing products/services related to that sector. Investors must also keep in mind that all mining stocks involve some degree of risk, so make sure it fits within your overall portfolio strategy for optimal returns and diversification.

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2. Invest in Innovation

Dolefin Rare Earth Elements Fund is an ETF option to consider investing in rare earth mining companies, while Betterment and Wealthfront each offer ESG portfolios with rare earth minerals as part of them.

Investors looking for exposure to rare earth elements can invest in exploration and processing companies such as Neo Performance Materials or Freeport-McMoRan, or they could purchase shares in an exchange traded fund like VanEck Vectors Rare Earth/Strategic Metals ETF (REMX).

Some investors have invested in rare earth elements through companies that recycle them. These firms specialize in recovering rare earth elements from electronic and high-tech products and repurposing them in new applications; they can even extract rare earths from waste produced by nuclear reactors and thorium mines.

Experts also believe that governments can aid rare earth mineral production by guaranteeing contracts to producers, giving financial institutions confidence to fund rare earths mining projects quickly. If other nations develop cheaper and safer alternatives to some rare earth minerals, demand could decrease significantly and your return potential could decline significantly.

3. Invest in Companies That Recycle

As well as traditional rare earth mining, there has been an expansion in an industry which recovers REEs from electronics and high-tech products, then processes them for reuse. While recycled metals don't hold as much value compared to pure rare earth oxides, their still have some worth. MP Materials bought Molycorp in 2020 and has since produced rare earth oxides such as neodymium and praseodymium oxides; heavy rare earth concentrates; as well as lanthanum and cerium oxides and carbonates for reuse.

Though investing in mining company shares can be lucrative, investors also have the option of purchasing physical rare earth oxides directly from metal trading companies. While these may not trade on stock markets like mining company shares do, they still represent an excellent way to diversify one's portfolio.

Some experts believe the global need for REEs will grow quickly as demand increases for 5G mobile communication standards, advanced X-ray and MRI technology, renewable energy production and electric vehicles. Yet others fear a global supply chain could become vulnerable to political interference as China restricts exports of REEs while trade tensions between the U.S. and China increase.

Investment in companies that recycle rare earths could help reduce our dependence on China; one such example would be Australian company Lynas which operates a mine at Mount Weld and sends its ore for processing in Malaysia where rare earths can be separated and purified, though they hope to restore domestic refining capabilities at Mountain Pass by next year.

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4. Invest in ETFs

When investing in ETFs, several key considerations must be kept in mind. You should evaluate costs involved, portfolio construction, past performance (which does not guarantee future returns), as well as understanding which index an ETF tracks.

An exchange-traded fund (ETF) is a pool of securities that can be traded throughout the day on an exchange, much like stocks. Each ETF has a distinct ticker to make buying and selling ETF shares simple and hassle-free; ETF providers create them according to specific methodologies before selling shares of them to investors.

Investors can utilize online screeners to identify ETFs that match their specific investment goals, including low cost ETFs focused on specific industries or those with socially responsible or environmental aspects.

ETFs can be invested in through either a regular brokerage account or retirement accounts like traditional or Roth IRAs, but keep in mind that any gains from selling ETF shares could be subject to tax in your standard brokerage account and dividend payments would likely be taxed as income in your retirement account. To understand how tax implications differ for different ETFs, speak with an Edward Jones financial advisor today!