Enter Steel Industry Investing With This Steel ETF

Workers in a steel factory
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Sector exchange-traded funds (ETFs) offer a way to gain exposure to an industry without having to corner the market on all stocks that trade in that sector. Say you want to invest in the steel industry. You could buy a steel ETF instead of making many trades to collect shares of steel firms in your portfolio. ETFs also come with certain tax benefits.

It is possible to target a steel index. Even then, you would have to trade multiple stocks to fill your basket and get the targeted index price. In both situations–index or individual stocks–you must pay commissions and fees on the trades. These costs can add up rather quickly.

For those reasons, it can be better to buy a steel ETF, if that is your target sector. With one trade, you get instant exposure to the industry and save on commissions.

There are downsides to this plan. You are limited to the companies in the fund. The ETF could shut down because of a lack of trading volume. (You would still get your market value.) The other downside is the limited options. The only active steel ETF on the market as of September 2021 is SLX.

You may still want to use a steel ETF to diversify your portfolio, hedge certain risk, or target the steel industry, Your next step is to research SLX.

Key Takeaways

  • Buying a steel ETF offers you instant exposure to the industry, savings on commissions, and tax benefits.
  • One downside to choosing a steel ETF over trading multiple steel stocks is that you are limited to the companies in the fund.
  • The only steel ETF now active to trade is the VanEck Vectors Steel ETF (SLX).
  • SLX tracks the NYSE Arca Steel Index. Some of this ETF’s top holdings include Rio Tinto, ArcelorMittal, Vale, and Posco.

SLX - Market Vectors Steel ETF

This steel ETF from Van Eck Global also tracks the NYSE Arca Steel Index. Some of its top holdings include Rio Tinto, ArcelorMittal, Vale and Posco. It has been around since October 2006 and also has listed options (calls and puts).

Some analysts describe SLX as tradeable and efficient. Still, it does not offer a fully comprehensive gauge of the whole steel market.

List of Base and Industrial Metals ETFs and ETNs

If you want to know about other metal ETFs, this list could help:

  • DBB - Invesco DB Base Metals Fund
  • JJM - iPath Bloomberg Industrial Metals Sub Index Total Return ETN
  • PICK - iShares MSCI Global Select Metals & Mining Producers ETF
  • REMX - VanEck Vectors Rare Earth/Strategic Metals ETF
  • RJZ - Rogers International Commodity Index Metals ETN
  • SLX - VanEck Vectors Steel ETF
  • XME - SPDR S&P Metals & Mining ETF

Article Sources

  1. ETF Database. "Steel ETF List." Accessed Sept. 21, 2021.