What are rare earth elements and why are they important?

Rare earth elements (REEs) are a set of 17 metallic elements that, despite their name, are relatively abundant in the Earth's crust but rarely found in concentrated, economically viable deposits. They're crucial ingredients in modern technology - powering everything from smartphone screens and computer hard drives to electric vehicle motors and wind turbines. Their unique magnetic, luminescent, and electrochemical properties make them irreplaceable in many high-tech applications, which is why they're often called the "vitamins" of the technology industry.

Why is there growing interest in rare earth element investments?

Interest is surging because of several factors: increasing demand from green technology and electronics, geopolitical tensions over supply chains, and the fact that production has historically been concentrated in just a few countries. As nations push for supply chain security and self-sufficiency in these critical materials, companies with mining and processing capabilities outside traditional sources are attracting attention. This creates potential investment opportunities as the world competes for these limited, essential resources.

Are rare earth element stocks risky investments?

Yes, they typically carry higher risk than more established sectors. These stocks can be volatile due to fluctuating commodity prices, geopolitical factors affecting supply chains, and the technical challenges of mining and processing these elements. Many companies in this space are still developing their projects rather than generating significant revenue. However, this higher risk comes with potential for substantial returns as global demand increases and supply diversification becomes a priority for many nations and industries.

What's the difference between miners, processors, and royalty companies in this portfolio?

Miners extract the raw materials from the ground, often focusing on exploration and development of rare earth deposits. Processors take those raw materials and refine them into usable forms for manufacturers - often a more complex and valuable part of the supply chain. Royalty companies don't operate mines themselves but provide financing to mining operations in exchange for a percentage of future revenue, offering investors exposure to the sector with potentially lower operational risks. This portfolio includes a mix of all three types to provide balanced exposure across the rare earth value chain.

How do ETFs like REMX fit into a rare earth elements investment strategy?

ETFs (Exchange Traded Funds) like REMX offer a way to invest in a basket of rare earth and strategic metals companies with a single purchase, providing instant diversification across the sector. This can help reduce the risk of investing in individual mining or processing companies, which may face project-specific challenges. Including an ETF alongside individual company stocks gives you both broad sector exposure and the potential for higher returns from promising individual projects - essentially balancing your risk and reward potential within this specialized sector.

15 handpicked stocks

King's Ransom

Own the building blocks of our technological future. This collection features carefully selected companies mining and processing rare earth elements - the irreplaceable ingredients powering everything from smartphones to electric vehicles. Handpicked by our expert analysts to capitalize on growing global demand.

Han Tan | Market Analyst

Updated 2 days ago | Published at juin 17