Cobalt is a rare earth metal found mostly in Africa and South America.
The demand for this mineral has increased significantly over the last decade due to its increasing usage in electric vehicles, and this has seen a huge rise in interest when it comes to investing in cobalt.
To help determine whether this is the right move for you, we have put together everything you need to know about investing in cobalt – including the main pros and cons to be aware of.
What Is Cobalt?
Cobalt is a relatively rare element that can be used in different alloys.
It is also an important component of superalloy materials that are used in jet engines, turbine blades, and other industrial machinery.
There are around 100 known deposits around the world, so the supply should not be affected much by global market fluctuations.
The price of cobalt has been on the increase recently because of growing demand from China – which controls almost half of the world’s production.
This has led to a number of companies looking into expanding their operations in countries like Canada, Australia, and Chile.
Pros And Cons Of Investing In Cobalt
As with any investment, there are a number of pros and cons that come with investing in cobalt, and these include:
- High Demand From China – China is one of the biggest consumers of cobalt products, and they have been steadily increasing their use of electric cars. As a result, more people are now interested in investing in cobalt than ever before.
- Growing Supply – With the current shortage of cobalt, there is no doubt that the future looks bright for those who get involved early.
- Mining Companies Are Not Always Sustainable – It is possible that the price of cobalt may fall if the demand drops. However, it is unlikely that this would happen overnight, and most mining companies will take several years to adapt to lower demand levels.
- Limited Returns – Investors hoping to make large returns on their investments will find that cobalt is not the best way to do this. The price of cobalt tends to move up and down quite dramatically, and while it is possible to make money from mining, it is very difficult to predict when the price will go up or down.
How Can I Invest In Cobalt?
When it comes to investing in cobalt, there are three main options available:
- Buying Shares Directly
- Buying Shares Through A Share Broker
- Investing In An ETF
Each option has its own advantages and disadvantages, so it is important to consider what your needs are before making a decision.
If you want to invest in cobalt without having any direct involvement with the mining process, you could also buy shares in a company – this allows you to benefit from rising prices but does require some research as there are many different types of companies involved in the mining industry. You can either buy shares directly or via a share broker.
This option is often cheaper than buying shares through a share broker, but you need to be aware of the risks associated with doing this.
The first risk is that the company might fail. If the company goes bankrupt, you lose all of your investment.
This is why it is always recommended to only invest in companies that you understand well.
The second risk is that you don’t know how much the company is worth.
When you buy shares directly, you are taking on all of the liabilities of the company.
So, if the company goes bust, you also end up losing everything.
A share broker acts like a middleman between you and the company.
They charge a fee for acting as a go-between, which means that you pay them a commission.
However, they also offer other services, including providing advice about whether the company is a good investment.
If you choose to work with a share broker, then you can avoid the risks associated with buying shares directly.
You won’t face any of the problems mentioned above, and you’ll also benefit from their expertise.
Investing In An ETF
An exchange-traded fund (ETF) is similar to a share broker because it allows you to gain exposure to a particular market without having to actually buy the underlying assets.
Essentially, ETFs allow investors to gain exposure to a certain asset class without needing to purchase individual securities, and there are a number of ETFs based around investing in cobalt.
You can purchase an ETF by placing a single order at a time, and you don’t need to worry about paying commissions.
Advantages Of Using An ETF
Unlike direct ownership, an ETF does not involve any of the risks associated with owning shares.
For example, if the company goes bankrupt, the value of your shares will remain unchanged.
Because an ETF trades on an exchange, you can access it easily using online trading platforms such as Interactive Brokers.
Disadvantages Of Using An ETF
While an ETF (see also ‘A List Of The Top Precious Metals ETFs‘) provides broad exposure to a particular asset class, it doesn’t provide full coverage.
For example, it’s possible to get exposure to stocks, bonds, commodities, currencies, and even gold.
But it isn’t possible to get exposure to every single type of asset.
Because an ETF trades on an open exchange, it charges high fees. These fees can add up quickly, especially if you’re looking to invest over a long period of time.
There are many different ways to invest in cobalt, and each one offers its own benefits and drawbacks.
Before choosing a method, it is important to think about what your goals are, how much you have to invest and do a little research on the most profitable options for your needs and goals.
This will ensure that you have all of the information you need to make a smart, informed choice, and allow you to maximize the potential profit available to you through investing in cobalt.