Investing in Copper Producer ETFs and ETNs
Most people first think of gold or silver when it comes to precious metals especially for investment purposes, but they don't usually think of copper. The demand for copper has made it a more popular precious metal than ever. People scavenge copper from abandoned buildings and other sources by stripping wires and pipes for the metal.
You might feel that copper is overplayed even though others believe that it is a hot commodity. Whatever your opinion, bullish or bearish, it's an investment opportunity for you. And what easier way to give your portfolio exposure to the copper market than a copper exchange-traded fund (ETF) or exchange-traded notes (ETN)?
Whether you're looking to hedge risk, invest in copper, or diversify your portfolio, copper funds and notes give you instant access to the copper sector. Many benefits, such as tax advantages, are also available.
Copper Producer ETFs and ETNs
There are three primary ETFs and ETNs on the market:
CPER: United States Copper Index ETF
The U.S. Copper Index Fund tracks the Summer Haven Copper Index Total Return Index that focuses on risk-adjusted returns on a portfolio of copper futures contracts. The index includes two to three eligible copper futures contracts that are selected on a monthly basis based on quantitative formulas relating to the prices of the Eligible Copper Futures Contracts developed by Summer Haven Indexing.
CUPM: iPath Pure Beta Copper ETN
This copper ETN comes from Barclays iPath, which correlates with the Barclays Copper Pure Beta Total Return Index. Like CPER, the exchange-traded note utilizes futures contracts in the copper markets to emulate its benchmark. According to iPath, the index may roll into one of a number of futures contracts with varying expiration dates, as selected using the Barclays Pure Beta Series 2 Methodology.
JJC: iPath DJ-UBS Copper Total Return Sub-Index ETN
This is another copper ETN from Barclays iPath, but this one is linked to the Dow Jones-UBS Copper Sub Index Total Return. Like CUPM, this copper ETN utilizes a futures contract on the commodity of copper, currently the Copper High-Grade futures contract traded on the COMEX, which is included in the Dow Jones-UBS Commodity Index Total Return.
Taking the Next Step With Copper ETFs and ETNs
If you have further interest in researching any of these copper funds or notes, information is available online about each product. You have some nice choices if you feel that copper is a strong commodity because it's used in so many different products such as coins.
No investment asset is risk-free, so make sure you understand the disadvantages, limitations, and reactions of each product to different market conditions before you buy. It might also make sense to look under the hood to see what's in your ETF, such as derivatives like futures, options, or forwards.
Be sure to consult a financial professional if you have any questions about any of the above copper ETFs or ETNs. And when you're confident in your decision, good luck!
Disclaimer: I have no positions in any of the copper exchange-traded products at the time of this publication.