Imagine a precious metal that can turn toxic gases into less harmful substances. One might believe that such an element would be extremely valuable and useful. The reality is that this precious metal exists as palladium, symbolized as Pd on the periodic table of elements. Palladium, and palladium ETFs, are popular investments because of the metal’s use in making catalytic converts in gas and hybrid vehicles.
Precious metals are inherently volatile, but palladium is a precious metal worth considering for those investors who can handle the risk. Palladium ETFs can even provide a less-risky investment vehicle than some stocks.
Understanding the value of palladium in the market
Palladium is known as a byproduct metal because it’s primarily extracted while mining for other metals. However, that hardly means it’s worthless. Even gold–the coveted superstar metal–is not as hot a commodity as palladium at times. Beyond its use in the exhaust systems of cars, palladium has other uses in dentistry and electronics, and jewelry makers use it as well.
And because the demand is greater than the supply, palladium investing makes sense. Due again to its status as a byproduct of platinum and nickel mining, the supply won’t increase much even as interest in palladium continues to rise.
Investing in palladium ETFs can make sense for some investors
Along with the supply and demand relationship, and its occasional status as the most expensive precious metal in the market, global demand is only growing. What does that mean for investors?
Palladium ETFs and investing in mining companies that extract palladium are better ideas than owning palladium outright as bullion. Stock in companies that mine palladium as a byproduct also provides access to other valuable precious metals. Palladium ETFs offer greater diversification than investing in individual stocks, so you may face lower risks with investments in palladium ETFs.
Finding the best palladium ETFs
To start, you’ll want to find palladium ETFs that have some of the top mining companies within the industry. Look for nickel and platinum mining companies, as that’s where you often find palladium, as well.
Look for industry prominence in mining as well as global diversification. Global diversification will help you avoid holding too much stock in one location that could fall victim to environmental or political instability.
It is also best to target traditional ETFs that have lower management expense ratios (MERs). Avoid high MERs unless the ETF has shown a long history of growth and profit. A low MER is one of the significant benefits of investing in ETFs over comparable mutual funds or stocks. Traditional ETFs are passively managed, and they follow an index, so you won’t run into excessive trading in and out of the market with these ETFs. If conducting many trades is your strategic approach to investing, then ETFs are probably not your target investment vehicle.
Overall, stick with simple palladium ETFs with good diversification. You could even look at the individual stocks that make up the ETF and look into the history, management, and profit of those companies if you want to be sure about your investment decision. It is always best to invest in companies whose management team is trustworthy and who have shown business success. Not feeling confident in a company’s ability to succeed and grow is a great reason to avoid investing in them.
Do you have investments in palladium already? How have they performed in your portfolio? Would you buy stock in a palladium mining company over an ETF?