3 Copper ETFs to Keep an Eye On in 2021
The copper industry is gaining momentum in recent months. And investors expect demand to soar as this metal plays a role in replacing oil with green energy. But should you invest in copper ETFs? Let’s take a closer look below.
Copper ETFs: An Overview
Copper is one of the most versatile commodities on the market. We use it in our homes, phones and cars. But it’s often overlooked compared to other metals such as gold.
This useful metal has skyrocketed to an all-time high in the last eight years. Recent focus on energy and industrial metals is red hot as the economy recovers.
Demand is expected to soar with the new administration’s recent infrastructure plans. The commitment to clean energy is turbocharging the need for copper.
The funds below focus on copper futures contracts and copper mining. So, as demand continues, these funds present a unique opportunity…
- The United States Copper Index Fund (NYSE: CPER)
- iPath Series B Bloomberg Copper Subindex Total Return ETN (NYSE: JJC)
- Global X Copper Miners ETF (NYSE: COPX)
Let’s take a look at these copper ETFs in more detail…
Copper ETF Highlights
The United States Copper Index Fund
Expense Ratio: 0.80%
CPER is structured like a commodity pool and it has close to 10 holdings. The top holdings in this fund are the Goldman Sachs Financial Square Government Fund and the U.S. Government Money Market Fund. So, it has a large cash weighting.
The fund seeks to track the performance of the SummerHaven Copper Index Total Return. This is a single-commodity index that trades on the COMEX exchange. The Copper Index consists of a few Eligible Copper Futures Contracts.
It selects eligible contracts every month based on a rule-based system developed by Summer Haven Indexing. These Copper Index contracts are considered the Benchmark Component Copper Futures Contracts.
This process helps to lower the ill-effects of contango. The system for selecting COMEX copper futures contracts is as follows…
- If the copper futures curve is in backwardation, it will select the two copper contracts from the first four with the greatest backwardation (or least contango), each weighted at 50%.
- If the copper futures curve is in contango, then the SCI takes positions in three contracts as follows: From the first four eligible contracts, it selects the two with the greatest backwardation (or least contango), each weighted at 25%. It also takes a 50% position in the December contract that expires following the previously examined four contracts.
Trading commodities and futures is complex. But with copper ETFs, you don’t have to worry about the trading. You can make a simple investment and the fund providers do the work for you.
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iPath Series B Bloomberg Copper Subindex Total Return ETN
Expense Ratio: 0.45%
JJC isn’t technically an ETF but it has some similarities. It’s structured as an exchange-traded note. The fund invests in copper futures. It tracks an index consisting of a single copper futures contract at a time.
This fund follows a fixed schedule that rolls into contracts two months before maturity in February, April and June, and three months from maturity in August and November.
The fund tracks the Bloomberg Copper Subindex Total Return. This reflects potential returns that are available in the future contracts on copper.
Global X Copper Miners ETF
Expense Ratio: 0.65%
COPX seeks to track the performance of the Solactive Global Copper Miners Total Return Index. This fund invests directly in global companies that are involved in copper mining and processing.
This fund has around 30 holdings. The largest ones by market-value are China-based company Zijin Mining and the U.S.-based company Freeport-McMoRan. These are sustainable mining companies with efficient and low cost methods.
Final Thoughts on Copper ETFs
Copper is an interesting play for investors. Demand shows no signs of slowing down. But there are always risks to consider before you invest. As always, you should do your own research before you decide to invest in copper ETFs.
If you’re interested in even more copper investing opportunities, consider checking out these copper stocks with growth potential. And don’t forget to sign up for Profit Trends as well. With that free e-letter, you’ll find even better investing opportunities.