Investing in Platinum ETFs
An in-depth look at the leading platinum ETFs in the U.S stock market this year. Here's what you need to know.
Precious metal prices have been on the rise. The S&P GSCI Precious Metals Index (made up of gold, silver, palladium, and platinum) is up roughly 50% since the summer of 2019. With inflation climbing, commodities such as platinum have been one way to protect an investment portfolio against escalating prices.
Demand for precious metals could steadily increase as the electric vehicle (EV) market grows and the use of semiconductors increases throughout the economy. Thus, investing in a platinum exchange-traded fund (ETF) might hold appeal for some investors.Investing in platinum ETFsPlatinum is a precious metal with multiple industrial uses. It's found in electric car batteries, as well as some fuel cells (such as hydrogen) used in the energy grid. Platinum is also used in the manufacture of some semiconductors and other electrical components, in medical devices, and in the production of industrial chemicals.However, platinum mining stocks are small and highly volatile in price, and many aren't publicly traded in the U.S. Platinum prices rallied during the pandemic but are actually down more than 30% over the last decade. Given the difficulty with investing in platinum, that's where a platinum ETF or another precious metals ETF might come into play.
Data source: Abrdn, GraniteShares, Barclays, and iShares. Data as of January 10, 2023.
Annual Expense Ratio
Assets Under Management
Abrdn Physical Platinum Shares ETF (NYSEMKT:PPLT)
A top fund that invests directly in platinum.
GraniteShares Platinum Trust (NYSEMKT:PLTM)
A newer entrant in the ETF world that also provides investors with access to platinum prices.
iPath Series B Bloomberg Platinum Subindex Total Return ETN (NYSEMKT:PGM)
A fund that invests in platinum via the futures market.
iShares MSCI Global Metals & Mining Producers ETF (NYSEMKT:PICK)
Top ETF that invests in mining stocks, including platinum producers.
First up is the Abrdn Physical Platinum Shares ETF from asset manager Abrdn (formerly Standard Life Aberdeen). The ETF's objective is to mirror the price of platinum less a fund fee of 0.6% annually ($6 for every $1,000 invested).The portfolio, currently worth $1.14 billion as of April 2022, consists of platinum bars stored in a JPMorgan Chase (NYSE:JPM) vault in London. Given that platinum prices have declined over the past decade, the Abrdn Physical Platinum Shares ETF is down, too. Minus the fee, this ETF has underperformed the price of platinum and the stock market overall. GraniteShares is a newer asset manager, having launched its first ETF in 2017. Its platinum offering, the GraniteShares Platinum Trust, was launched in 2018. It charges 0.5% per year.The GraniteShares Platinum Trust also represents a physical portfolio of platinum ingots kept in a vault. Although it has a lower annual expense ratio than Abrdn's ETF, GraniteShares Platinum Trust has also underperformed the price of platinum since the fund's inception due to the annual expense.3. iPath Series B Bloomberg Platinum Subindex Total Return ETNThe iPath Series B Bloomberg Platinum Subindex Total ReturnSM ETN is the smallest fund on this list. Unlike the Abrdn and GraniteShares fund, the iPath offering is actually an exchange traded note. The portfolio has no physical holdings. Instead, it invests in platinum futures contracts (a type of derivative) to follow the price movement of actual platinum.The iPath Series B Bloomberg Platinum Subindex Total ReturnSM ETN has an annual expense ratio of just 0.45%, lower than Abrdn and GraniteShares. However, since the iPath fund invests in futures contracts rather than physical platinum, it can significantly underperform the price of platinum over the long term.
If you're interested in directly investing in mining stocks, consider the iShares MSCI Global Metals & Mining Producers ETF. This is not a pure play on platinum or precious metals. Rather, the ETF portfolio consists of almost 260 global mining stocks. It has an annual expense ratio of only 0.39%.Although this is not a direct investment in platinum, iShares MSCI Global Metals & Mining Producers ETF is worth a look. With dividends reinvested, it has returned about 50% over the past decade, a far better return than investing in just platinum. Platinum is an interesting commodity to consider adding to a portfolio. The precious metal could see demand increase in the coming years as cars and trucks go electric and as other parts of the global energy grid make use of renewable energy sources. However, like other mined commodities, platinum prices will be volatile and unpredictable.
JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. Nicholas Rossolillo has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends JPMorgan Chase. The Motley Fool has a disclosure policy.
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