How to invest in copper in 2023
This page outlines how to start investing in copper. We expand on why you might wan to invest, and explain how with a step-to-step guide on the whole process. This should enable you to decide whether copper is the right investment for you.
Where can I invest in copper online?Copy link to section
To invest in copper, you will need to register with an online broker. Our commodity experts have selected the best in the market. To start investing in copper, click the links below, or continue scrolling to learn more.
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Why invest in copper?Copy link to section
Copper is an incredibly lucrative commodity and there are a multitude of reasons why you should invest. For instance, investors are interested in commodities as they provide a hedge against inflation. The main reasons why you should invest in copper today are outlined below.
- Hedge against inflation. The risk of inflation concerns all investors. Inflation occurs when currency loses value over the years, and as this occurs, the prices of essential commodities rise and prove lucrative for commodity investors. As such, investing in copper provides a hedge against the rise in inflation.
- Diversify your portfolio. Investing in a commodity like copper is a means of diversifying your portfolio. Diversification of assets in your investment portfolio hedges against specific-asset risk. As copper is a versatile metal that is globally popular, adding copper to your portfolio hedges against the risk of other underperforming assets.
- Demand for electricity. Electricity is conducted through wiring, and copper is used to make electrical wiring. Electricity is necessary for the generation and transmission of power that is the cornerstone of modern technology. Investing in copper aids the speculation of rising demand for electricity.
5 top tips for investing in copperCopy link to section
We have laid out the following step-by-step guide to help kickstart your journey. Scroll through and follow along so you are well set to make the investment.
- Decide on an investment strategy. Before you invest, you must focus on how you want to invest – are you looking to be an active or a passive investor? This will determine the crucial consideration of how much risk you are willing to accept.
- Do your research. You will then want to do your due diligence about the copper market and decide your plan of investment. We have illustrated the many ways you can invest in copper further down this page.
- Set a budget. Once you have established your risk appetite, you must set your budget for investing in copper. You must only take on the risk that you can afford to lose.
- Choose between the long term and short term. You have financial goals and you must accordingly decide whether copper is a short or long term investment for your portfolio. You should look into conducting technical analysis if you are taking a short term view, and a fundamental analysis if you are taking a long term view.
- Find an investment platform. Not all brokers offer copper as a commodity investment. It is crucial that you check if your broker of interest offers you the option to invest in copper. Our expert analysts have selected the top brokerages offering access to the copper market, you can view these by clicking the button below.
Ways to invest in copperCopy link to section
There are numerous ways to invest. The approach you should take will depend on your budget and your experience as an investor. We have outlined the best ways to invest in copper and explained the benefits of each below.
Invest in copper stocksCopy link to section
A great way to gain exposure to copper is through buying shares in companies that focus on the copper market, as the price of their shares is usually correlated with the price of copper itself. You should buy shares in companies that deal with the extraction, development, and/or production of copper. Examples include: Ero Copper Corp. (ERO.TO), Freeport-McMoRan Inc. (FCX), Capstone Mining Corp. (CS.TO).
Invest in copper ETFsCopy link to section
You can also buy shares in Exchange Traded Funds (ETFs) that track the performance of the metals industry, or even those that track the futures price of copper in particular. Buying shares in copper ETFs is often the easiest way for beginners to get started investing in copper. Notable copper ETFs include: Global X Copper Miners ETF (COPX), iShares Russell 1000 ETF (IWB), United States Copper Index Fund (CPER).
Invest in copper mutual fundsCopy link to section
Copper mutual funds are like ETFs, except that a fund manager buys and sells shares according to their own expertise in a managed fund. You will find that there are mutual funds that particularly focus on metals. For instance: you can invest in mutual funds that hold stocks of companies that deal with the mining of copper, you can also invest in mutual funds that focus on natural resources and include copper miners.
Invest in copper futuresCopy link to section
For the seasoned investor, investing in copper futures can prove to be an ideal play. Copper futures help you gain exposure to copper through a contract – they require that you buy or sell a specific quantity of copper before a specific expiration date. You need a deep understanding of market impacts and volatility in order to invest using futures, and therefore considerable experience in the market is key.
Invest in physical copperCopy link to section
The most direct investment into copper, is to physically own copper as an asset. The copper market offers means for you to own the physical commodity. Direct ways for you to invest in copper would be to buy copper coins from private dealers and/or copper bullions from metals dealers.
How does the copper market work?Copy link to section
It works in a similar way to most other markets that function on the basis of supply and demand regulating the price. There are notable factors that affect the supply and demand of copper. As such, we have pinpointed the factors you should watch out for when considering copper for your portfolio:
- Electricity prices. Copper is used to make electrical wiring. Therefore, the price of electricity impacts the price of the commodity. For instance, if the global demand for electricity was to drop, there may be a surplus of copper. This supply would exceed the demand, and there would consequently be a decline in the price of copper.
- Oil prices. Refining copper is an energy-intensive method. There are significant costs of energy in extracting and refining copper ores. Therefore, a rise in the price of oil would cause a rise in the price of energy, which would consequent a rise in the price of copper.
- Chilean supply. Chile is the world’s largest producer and exporter of copper – 28% of the world’s copper comes from Chile. If there was any turbulent event (i.e. civil war, political turmoil, natural disaster) that caused a decline in Chilean production of copper, there would be a worldwide decline in the supply of copper. Companies that import copper from Chile would incur higher costs of production from the shortage and this would adversely impact the price of their shares.
- Chinese demand. China is the world’s largest buyer and importer of copper. The country’s massive manufacturing sector uses a million tonnes more of copper every year than the rest of the world. China’s massive purchases directly affect the global price of copper, therefore if the country was to suddenly purchase less, this would mean a decline in the price of copper.
When should you invest in copper?Copy link to section
It is ideal to invest in copper when inflation is on the rise. As aforementioned on this page, investors put money into copper in order to hedge against inflation. Therefore, a rise in the rate of inflation is an opportune time to buy copper.
We have highlighted the factors that impact the copper market above, it is a good idea to stay on track with these factors when considering the addition of copper to your portfolio. For instance, an increase in oil prices would drive up the price of energy, in turn also driving up the price of copper.
Is copper a good investment in 2023?Copy link to section
Most likely, but you must do your due diligence before investing in copper. This page has covered factors that shall impact the price of copper this year. Oil prices continue to rise, causing energy prices, and consequently the price of copper to follow suit. Whereas, China’s slow regearing of focus to raw copper instead of refined copper may affect production and export from Chile. It is most important to also bear in mind the rate of inflation to aid your decision on when to buy copper.
What should I do now?Copy link to section
If you are ready to start investing in copper, you must first register with an online broker that offers you access to the copper market. You should also review our Learn Hub – a store of our courses on stocks, crypto, and currencies. If you would like to learn how to trade copper instead, you can find the link to our page on how to do so with our expert analysis below.
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