How To Invest In Copper

Instead of simply buying and selling bonds, stocks, or exchange-traded funds (EFTS), there are many different ways to invest.

How To Invest In Copper?

One way is through investing in physical assets such as commodities including metals. 

For instance, copper makes for a popular metal to invest in.

Not only is it used in many modern electronics such as wiring and semiconductors, but it also plays a vital role in many different industries such as vehicle production and home construction. T

herefore, you can see the appeal of investing in copper. 

In addition to this, compared to other metals such as gold or silver, copper tends to be cheaper.

This is great for investors who are concerned about investing in expensive metals. 

Investing In Copper: 3 Steps

To begin your investment journey in copper, you should follow these steps:

1. Decide How You’re Going To Invest

There are many ways for investors to invest in copper. The first option is to purchase physical copper; however, there are complications of storage and transportation with this option. 

The next option, and the easiest, is through investing in copper EFTs. Essentially, the funds are supposed to move in tandem with copper prices, providing investors with easy access to exposure to copper. 

You could also trade derivatives, which include copper options or futures.

This provides an opportunity for investors to make a profit from their copper price movement predictions without needing the physical copper. 

Another way to develop exposure to copper is by investing in a mining company that extracts copper from the Earth.

While you’re not investing in pure copper, since you’re also betting on the success of that particular business, there are still means to profit.

However, the business you invest in could mean the difference between success and loss, even if there were a boom in copper prices. 

2. Open An Account

Once you have considered the different ways of investing in copper, it is now time to open a brokerage account.

Depending on how you invest will determine which broker will work best for you. 

If you’re looking to invest in copper mining businesses or EFTs; generally, most brokers can support this.

On the other hand, if you want to solely rely on derivatives, then there are specialized brokers for this. 

No matter which option you choose, you should always pay attention to the fees each broker is offering.

Typically, you’ll want to choose the one that provides the lowest costs for your desired trading plan.

If you are directly purchasing physical copper, you’ll want to find a source that distributes this copper.

Likewise, you need to consider storage options. While others prefer to store it at home, some prefer large storage facilities; generally, this is dependent on the size of your investment.

3. Submit A Buy Order

After you have opened an account, you’re able to begin your copper purchasing journey.

You are now able to submit a purchase order to buy either the EFT, derivative, or stock that suits your requirements, ensuring more copper exposure to add to your portfolio.

What You Need To Know Before Investing In Copper

What You Need To Know Before Investing In Copper

It’s important to take into consideration the factors that shape copper’s value before making any investments.

Like most things, supply and demand play a huge role in determining copper’s long-term value.

High demand and lower supper will boost prices, whereas low demand and high supplies will reduce these prices.

In some instances, countries or businesses will stockpile copper. This ensures that they can dip into their assets if demand rises or supplies fall temporarily, leveling out price variability. 

Unlike precious metals, for instance, gold (see also ‘Gold vs. Platinum‘), copper is a metal that is primarily used for industrial materials.

Therefore, this demand is usually driven by electronics production, home construction, and manufacturing.

The general rule of thumb is that when economies are strong, the demand for copper increases; weaker economies suppress the copper’s cost. 

Due to recent suitability initiatives, the price of copper has increased. This is the result of it being used in more renewable energy and electric vehicles. 

Understanding The Risks Of Copper Investment 

Like all types of investment, there are risks associated with investing in copper.

For instance, when investing in copper EFTs, you run the risk of copper prices potentially holding steady or falling, this prevents you from deciphering the profit available.

Similarly, investing in a copper company gives you exposure to copper and the business; however, there are risks of exposure to mismanagement or other issues with the company you’re investing in. 

When purchasing physical copper, you need to ensure that your metal is protected and safe.

With improper storage, your metal can become damaged and even stolen or lost. 

When investing using derivatives or options, you may also face some risks.

For instance, some derivatives may involve infinite risks. When using derivatives, investors need to understand these risks associated with debt or a high amount of leverage. 

Pros and Cons Of Investing In Copper

Pros

  • When compared to other metals, copper is at a lower price – Copper tends to be cheaper than other metals such as silver or gold (see also ‘Gold vs. Silver: Which Should You Invest In?‘). 
  • Industrial use ensures value – Unlike precious metals, copper is used industrially, which could be argued to provide it with a higher intrinsic value.
  • Many ways to invest in it – Either through EFTs, holding the physical copper, trading derivatives, or purchasing shares in a mining company. 

Cons

  • Investing in copper businesses doesn’t provide you with physical exposure to copper – There are also additional risks associated with an investment in copper. 
  • The strength of the economy and price are directly linked – Copper’s value is generally correlated to a specific economic performance, seen as a market bellwether. 

Final Thoughts

If you’re looking to invest in metal, copper is one of the best among them.

Not only is it cheaper, but its industrial use also ensures its value. However, like most investments, it’s important to be aware of the risks. Hopefully, this guide has informed you on how to invest in copper.

Luke Baldwin
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