Undoubtedly, we are entering the age of electrification. We are already set to move away from burning fossil fuels to artificially generate heat and kinetic energy and rely on renewable sources from nature. All car manufacturers have announced discontinuing the gasoline & diesel cars in favour of the electric ones. One critical component is at the heart of all of these innovations: the battery.
Lithium is currently the dominant material being used to build batteries. This is because its ores are commonly found worldwide, which we have abundantly, and it's efficient at storing electricity for a long time. Theoretically, it should be cheap and performant, which sounds fantastic, but that's not the case, it seems in reality.
Tesla CEO Elon Musk recently had a word of advice urging the entrepreneurs to get into the lithium refinery business as that has become the bottleneck causing the lithium crisis. He even said things like:
- "Lithium margins right now are practically software margins."
- "Do you like minting money? The lithium business is for you."
I think there is no point in me trying to convince you why we should invest in lithium and the related battery technologies. Their long-term trajectory is apparent, and thus, this is an investment to be held for years to come without being concerned with short-term timings.
Current State of Lithium Investments
If you bought a lithium ETF several years ago, you are comfortably sitting at almost tripling your investments. What's so remarkable is that this is after accounting for all the recent global crises that have crashed the stock markets:
- COVID pandemic
- Russia & Ukraine war
- Rising inflation and interest rates
The lithium & battery tech-related stocks are considered growth stocks, and therefore, their prices have been hammered in the current economy, which is now entering a recession.
What and When to Buy?
The two most established and well-diversified ETFs for the lithium and battery technologies are the following:
Please check their websites to check their investment strategies, expense ratio, and Asset Under Management's size. I am personally planning on diversifying equally between the two ETFs.
As mentioned earlier, the above ETFs consist of growth stocks, which means we must pay attention to the greater economic cycles, especially when we are about to enter a recession. Timing when we will exit the recession is impossible, but historically the recession usually lasted 6 to 24 months. My plan is cost average by periodically buying the ETFs every month starting from the end of this year.