Is Copper Stock a Good Investment Choice for You?

May 7th 2016

Commodity trading is viewed by some as a game best played by the experts. Thanks to the wealth of information available and the many trading options out there, that's no longer the case. Copper can be traded short-term to take advantage of market fluctuations or as a long-term opportunity to grow a portfolio. 

Factors Driving Growth 

Useful in so Many Ways - Copper may not get as much press as more glitzy precious metals, like gold and silver, but it's an important base metal. It has the desirable traits of being a good conductor of electricity, reasonably easy to work with and not very corrosive. It's plentiful enough for there to be a large supply to keep it relatively affordable for manufacturers. Copper is used in so may industries that there will be a need for more copper anywhere there is growth. That's especially true in emerging markets.

Currently, China is the world's biggest consumer of copper, using about seven times as much as the United States. India is seeing demand rise sharply as well. As those two countries see their economies emerge, the demand may outpace supply. The versatility of copper means it's going to be around as a major player for a long time. 

Copper Stock as a Market Indicator

Looking to the Future - The metal is so tied to world economies that it has earned the moniker 'Dr. Copper' because it has traditionally been such a good indicator of the overall direction markets will be trending. At a London meeting in October 2013, with as many as 10,000 industry professionals attending, the general consensus was that the world economy as a whole is on solid footing and moving forward. That said, the price of copper is down 12% for the year and 30% off its record high, set in 2011. The spike upward that fueled that high proved to not be grounded in solid fundamentals. 

Pent Up Value - Some observers have been troubled by the fact that while equities have surged through 2013, metals have not. That could be more of an aberration than anything else. Metals were so overpriced at their last highs that there was room for more correction. Now, the mood surrounding copper is optimistic going into 2014. 

Where to Find a Good Investment in Copper Stock

Exchange-traded funds (ETFs) are the most common investment vehicle for copper. JP Morgan Chase and BlackRock were in the process of creating an ETF that will hold physical copper, but that move was challenged in court. The party driving the litigation held that the creation of a fund that holds large amounts of physical copper will "lead to an investor-financed squeeze on the market." In October, Southwire Co. dropped the case, seemingly because they think market conditions have changed enough that such funds will never actually be created for copper. 

As a result, investing in copper still means buying into funds representing mining or fabricating interests, trading futures or seeking equity opportunities along the same lines. This posting on NASDAQ.com has a nice list of different options available. There are promising funds that look to be primed for growth. 

The bottom line is that there are opportunities for investors to do well with copper. Of course, there are risks. The more research you do, the more informed you will be about the right decision for your portfolio. 

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