What’s so great about copper?
This metal places third after gold and silver for jewellers but tops the list for builders and engineers. It’s durable, malleable and conducts heat and electricity extremely well.
You’ll find copper in industrial machinery, in your home's electrical wiring and plumbing, and on the bottoms of your pots and pans.
Its uses are so widespread that the base metal is often called “Dr. Copper” for its ability to diagnose the overall health of the economy. And with recovery from the pandemic well underway, the price of copper is once again along for the ride.
But while the global recovery is one factor making copper more appealing, a number of major projects and trends are expected to continue ramping up demand.
Why demand may rise even more
As the U.S. pushes forward with plans for massive infrastructure improvements aimed at fixing its ailing highways and bridges, and upgrading airports and transit systems, expect copper to play a major role in any construction projects.
Even more good news for resource-rich Canada, and investors here, comes from copper's key role in the switch to electric cars and sustainable energy. Electric vehicles require two-to-four times more copper than their petrol-powered counterparts.
Copper’s antimicrobial properties could also make it useful for high-touch surfaces in hospitals and health care centres looking to quell the spread of infection in the wake of COVID-19.
BNN Bloomberg resources commentator Andrew Bell notes copper is up 30% this year, with recent trading levels putting the metal near it's 2011 record high.
How do you invest in copper, anyway?
Investors have a few different ways to put their money into copper, though some are trickier than others:
Bulllion. Investors can just buy the metal, in the form of coins or bars, to save and later sell. But if you’re looking to make a large investment, storage space will become an issue.
ETFs. Commodity exchange-traded funds (ETFs) offer a simpler way to gain exposure without having to directly own the commodity. Some commodity ETFs let you zero in on a single commodity, while others group them together for broad-based exposure. For example, the Invesco DB Commodity Index Tracking Fund tracks 14 heavily traded commodities, copper included. ETFs typically have very low management fees, and you save even more by buying them through a zero-commission investing app.
Stocks. Another option is to invest in a specific copper-mining company. Keep in mind, the performance of the stock won’t perfectly match that of copper because of business factors like the company’s financials, quality of its management team and long-term production prospects. As with ETFs, you can easily invest in commodity stocks through any number of investing apps.
Futures. Investors can use futures contracts to bet on how a particular commodity’s price will move. Futures involve agreeing to buy or sell a given commodity at a predetermined price and time in the future. While you can trade copper futures on exchanges like the COMEX and London Metal Exchange — assuming you have a brokerage account that offers it — novice investors should be extremely cautious due to the volatility of most commodity prices.
What are the risks?
Investing in copper isn’t for everyone. Commodities are generally susceptible to big swings in value, and copper may be more susceptible than most.
Chile, Peru and China collectively account for nearly half the world’s mining output of copper, and Chile alone represents more than a quarter. Government policies, labor disputes and other forms of local disruption can all have an oversized impact.
If you're not ready to go all-in on copper bullion, futures or commodities ETFs, you can always try an app that helps turn your copper pennies into diversified investment gold.
Fine art as an investment
Stocks can be volatile, cryptos make big swings to either side, and even gold is not immune to the market’s ups and downs.
That’s why if you are looking for the ultimate hedge, it could be worthwhile to check out a real, but overlooked asset: fine art.
Contemporary artwork has outperformed the S&P 500 by a commanding 174% over the past 25 years, according to the Citi Global Art Market chart.
And it’s becoming a popular way to diversify because it’s a real physical asset with little correlation to the stock market.
On a scale of -1 to +1, with 0 representing no link at all, Citi found the correlation between contemporary art and the S&P 500 was just 0.12 during the past 25 years.
Earlier this year, Bank of America investment chief Michael Harnett singled out artwork as a sharp way to outperform over the next decade — due largely to the asset’s track record as an inflation hedge.
Investing in art by the likes of Banksy and Andy Warhol used to be an option only for the ultrarich. But with a new investing platform, you can invest in iconic artworks just like Jeff Bezos and Bill Gates do.