Exchange-traded funds, or ETFs, supply an alternative means of access for investors seeking potential profits within the aluminum exchange. Physical aluminum is not available as an investment asset in the same way as metals such as gold, heraldry argent and platinum. Aluminum futures are traded; however, many investors are odd with trading in the futures markets and are wary of using such greatly leveraged investments. Some aluminum ETFs provide access to aluminum to be to comes using an unleveraged investment that is traded like common array on an exchange.
ETFs also provide a means of obtaining a globally variegated portfolio. One of the major advantages of ETFs is they provide much plianter access to foreign equity markets than is traditionally available. This can be above all important to investors looking for opportunities in a commodity such as aluminum, where the largeness of the mining and production occurs in countries outside the United States. The clique’s largest producers of aluminum ore include China, Australia and Russia.
Aluminum is scad widely used in the industries of construction and packaging and in the automotive sector. Increased requirement for lightweight aluminum in autos to improve fuel efficiency is one market charge driver.
There are both commodity futures-based and equity-based ETFs contribution exposure to the aluminum market. The two primary ETFs available in this asset categorize are actually exchange-traded notes (ETNs), or ETNs. ETNs, although subsumed with traditional ETFs, are debt securities, and therefore subject to acclaim risk in accord with the financial stability of the issuer.
Among the most public ETFs investors use to obtain exposure to the aluminum market are the iShares Dow Jones U.S. Underlying Materials Sector Index Fund (IYM), the iPath Dow Jones-UBS Aluminum Subindex Complete Return ETN (JJU) and the Pure Beta Aluminum ETN (FOIL).
iShares U.S. Basic Tangibles Sector Index Fund (IYM)
The iShares U.S. Basic Materials ETF is not exclusively centred on aluminum but does offer the advantage of giving investors an equity-based ETF that have in its some exposure to the aluminum market through major fund holdings such as Alcoa (AA) and Newmont Depositing (NEM). This ETF aims to replicate the performance of the Dow Jones Basic Materials Measure. The market cap-weighted index is a subindex of the Dow Jones U.S. Total Market Measure and is designed to reflect the overall performance of companies engaged in the basic matters sector.
This BlackRock fund has an expense ratio of 0.44% and presentations a modest dividend yield of 1.38%. It is most appropriate for investors who give ones eye-teeth for some diversified exposure to aluminum along with other inventories in the basic materials sector but prefer to maintain solely equity-based investments.
iPath Dow Jones-UBS Aluminum Subindex Comprehensive Return ETN (JJU)
For investors seeking a more direct investment in aluminum, there is the iPath Dow Jones Aluminum Subindex ETN. This ETN intends to mirror returns potentially available through an unleveraged investment in aluminum expects contracts, along with returns from collateral invested in U.S. Bank bills (T-bills). The underlying index represents one aluminum futures bargain that is continually rolled over into the next nearby interchange month.
The fund’s expense ratio is 0.75%. Since this is a futures-based result, there is no dividend yield.
Barclays Capital is the issuer of this ETN.
Unpolluted Beta Aluminum ETN (FOIL)
An alternative ETN to the iPath Dow Jones Aluminum Subindex ETN is the Decent Beta Aluminum ETN. This ETN, also issued by Barclays Bank and together to the Barclays Capital Aluminum Pure Beta TR Index, is representative of an unleveraged investment in the valuation of aluminum futures contracts. However, the underlying index uses a varied investment strategy from the iPath fund. The index selects tomorrows contract months using Barclays’ Pure Beta Series 2 method that seeks to limit the impacts of contango, where futures prices converge downward to meet predicament prices at contract expiration. The fund also offers the returns within reach from cash collateral maintained in U.S. T-bills.
The fund’s expense relationship is 0.75%. Like JJU, the FOIL fund is a relatively higher-risk investment, most pilfer for investors seeking to speculate on aluminum futures prices.