-
Explains the strategic importance of rare metals in advanced manufacturing, modern technology and energy systems
-
Shows how investors can access rare metals via ETFs, including their risks, volatility, costs and tax implications
-
Compares specialized and broad natural resources funds, helping readers evaluate performance, diversification and portfolio fit
Rare metals and elements have received much attention for their role in modern technology and industrial production. They have unique catalytic, magnetic and optical properties and are difficult, if not impossible, to replace.
Exchange-traded funds (ETFs) that invest in rare metals and elements companies are grouped in the natural resources category. This category includes both those specialized ETFs as well as ETFs and mutual funds that provide broader commodity exposure. We look at both in this article to explore the options.
Powering Technology
Rare metals include rare earth elements, lithium, cobalt, nickel, graphite and others that are critical to advanced manufacturing and energy systems. Rare metals are widely used in electric vehicle (EV) batteries, wind turbines, solar panels, smartphones and semiconductors because they possess unique magnetic, conductive or heat-resistant properties.
For example, rare earth elements such as neodymium and dysprosium are key components in powerful permanent magnets used in electric motors and renewable energy equipment. Lithium, nickel and cobalt are foundational materials in rechargeable batteries that power EVs and large-scale energy storage systems.
Beyond clean energy, rare metals are also vital for defense technologies, aerospace applications and medical devices, making them strategically important resources for national security and economic competitiveness. As global electrification and digitalization accelerate, demand for rare metals continues to grow, increasing focus on supply chains, mining development and recycling technologies.
Limited Market Access
Supply chains for rare metals are extremely concentrated and vulnerable to disruptions from macroeconomic policy changes, global trade policy and geopolitical tensions. China dominates the rare earth market, so most trading and price benchmarks are concentrated there. Thus, some rare metals have futures listed on specialized exchanges in China, such as the Shanghai Futures Exchange.
Outside of China, individual investors are not able to gain exposure to rare metals through standardized futures contracts in commodity markets. Over-the-counter (OTC) swaps or forward contracts may exist for industrial buyers of rare metals, particularly for long-term supply contracts. Directly purchasing and storing metals and minerals is not a viable option for most investors. Exposure to these metals can be gained by investing in companies across the supply chain through individual stocks or ETFs.
Natural Resources Sector Equity Funds
ETFs and mutual funds in the natural resources sector category invest in companies involved in the exploration, extraction, production and distribution of raw materials—including rare earth elements and metals—that are used throughout the global economy. These funds typically hold stocks of firms operating in industries such as energy, metals and mining, agriculture, timber, and chemicals. Many include companies engaged in oil and gas production, copper and iron ore mining, fertilizer production, and forest products, reflecting the broad scope of resource-based industries.
We used the AAII A+ Investor ETF and Mutual Fund Screeners to create our lists of funds. Funds were required to have a minimum of $50 million in assets to be included.
Characterizing Rare Metals and Elements ETFs
The group of ETFs in Table 1 occupies a distinct thematic niche within the natural resources equity category. Choices for rare metals and elements ETFs are limited. Only four have 10-year track records: Global X Lithium & Battery Tech ETF 
(LIT), Global X Uranium ETF (URA), VanEck Rare Earth & Strategic Metals ETF (REMX) and VanEck Uranium & Nuclear ETF (NLR). Sprott Active Metals & Miners ETF (METL), launched in September 2025, is the youngest and the only actively managed ETF in Table 1.
Download the Excel spreadsheet for Table 1.
ETFs that include “junior” and “miner” in their names hold smaller, early-stage companies focused on exploration and development rather than large-scale production. These companies differ from major producers in size, operational stage and risk profile.
Returns for rare metals and elements ETFs have been volatile over the past five years.
The majority of expense ratios are above the natural resources category average, as shown by A+ Investor Grades of D and F. The average expense ratio for Table 1 is 0.69%, compared to the category average of 0.53%. Category risk index values for ETFs in Table 1 are high. The category risk index relates the volatility of an ETF to the average volatility for ETFs in the same investment category.
What’s Behind the High Yields
The distribution yields of rare metals and elements ETFs can be relatively high—many are above the category average of 2.0%. There are several reasons for this.
Some of these ETFs own shares in foreign corporations that qualify for treatment as passive foreign investment companies (PFIC) under the U.S. Internal Revenue Code. The primary revenue of PFICs comes from investments rather than business operations. Non-U.S. corporations that invest in mines that are not yet operational are often treated as PFICs. When an ETF invests in PFICs, it generally intends to make a mark-to-market election at the end of each taxable year. This election allows an ETF to recognize unrealized gains as ordinary income and pass them through to shareholders. Investors are potentially taxed even when shares are not sold.
During commodity upcycles, miners can generate substantial free cash flow and increase dividend payouts. Generally, any ETF may sell appreciated holdings during rebalancing to realign with its index, and the resulting profits are distributed to shareholders as capital gains.
These factors also help to explain why the median tax-cost ratio for rare metals and elements ETFs is 1.05%. An investor in the highest tax bracket would lose 1.05% of their return to taxes by holding the median ETF.
Global Holdings and Volatile Outcomes
Sprott Critical Materials ETF (SETM) focuses on the generation, transmission and storage of energy. It has the highest one-year performance in Table 1 at 170.9%. The ETF’s top 10 holdings are upstream mining companies that produce the metals and minerals needed for electrification and decarbonization, rather than downstream manufacturers or technology companies. Of the nine types of materials companies the ETF invests in, copper and uranium firms have the heftiest weightings at 27.4% and 24.3%, respectively. The portfolio carries an international tilt, with Canadian-domiciled companies representing the largest country allocation at 38.3%, followed by Australia at 24.6%.
The highest-yielding ETF in Table 1 is Sprott Lithium Miners ETF (LITP). Its trailing yield is 6.3%, and capital gains and income are normally distributed annually. At 2.2%, the ETF also has the highest tax-cost ratio among the funds shown in Table 1. Australian companies comprise the largest allocation. The majority of the 42 companies held in the portfolio are small cap. A wide difference exists between the one-year return of 152.3% and the three-year annualized return of –2.0%. This is likely influenced by volatility in lithium prices.
Amplify Lithium & Battery Tech ETF’s (BATT) approach doesn’t focus on lithium miners. Instead, it focuses on companies in the development, production and use of lithium battery technology. Holdings are primarily large-cap companies. The largest country allocation is to China, and the largest resource/market allocation is to copper, followed by EVs. A significant portion of the top 10 holdings are direct investments in foreign companies that do not trade on American stock exchanges.
Sprott Active Metals & Miners has the flexibility to invest in companies involved in mining, recycling, royalty/streaming businesses and related services, spanning both critical materials and traditional metals industries. Besides rare metals and elements, the ETF invests in steel and iron ore equities and mining service providers. It has an 80% allocation to foreign stock.
Other Natural Resources ETFs and Mutual Funds
Given the small number of rare metals and elements ETFs, we expanded our analysis to include other natural resources ETFs and mutual funds, shown in Table 2 and Table 3, respectively.
Download the Excel spreadsheet for Table 2.
Natural resources run the gamut from non-precious metals to materials, water and timber. All of the mutual funds in Table 3 have a 10-year track record, as do most of the ETFs in Table 2. Most of the ETFs are passively managed, whereas all of the mutual funds are actively managed.
The average expense ratio for the ETFs in Table 2 is 0.47%, which is lower than the natural resources category average of 0.53%. The expense ratios and tax-cost ratios of the mutual funds in Table 3 are generally higher than those of the ETFs in Table 1 or Table 2, reflecting active management. The natural resources category average expense ratio for mutual funds is 1.15%, while the mutual funds in Table 3 have an average expense ratio of 1.03%.
Download the Excel spreadsheet for Table 3.
AI Boosts Copper Fund Performance
Copper has become a critical material for several fast-growing industries, including those involved in EVs, renewable energy infrastructure, power grids and electrification, and data centers and infrastructure related to artificial intelligence (AI). While the rare metals and elements ETFs in Table 1 have meaningful allocations to copper, the copper ETFs in Table 2 are solely or predominantly focused on copper.
Among the ETFs and mutual funds presented in Tables 2 and 3, Sprott Junior Copper Miners ETF (COPJ) delivered the strongest one-year return at 195.1%. The ETF provides exposure to mid- and small-cap exploration- and development-stage copper miners. Canadian-domiciled companies account for the largest allocation within the portfolio.
Broad Natural Resources Funds Post Average Returns
State Street SPDR S&P North American Natural Resources ETF (NANR) provides unique exposure to natural resources. Specifically, the strategy focuses on publicly traded U.S. and Canadian large- and mid-cap companies within the energy (45% target allocation), metals and mining (35%), and agriculture (20%) sub-industries. This ETF is an option for those looking to allocate to a broader swath of natural resources. Its one-year return of 61.1% earns an A+ Investor Grade of C, meaning it is average for the category.
Materials and Forestry Funds Lag
iShares U.S. Basic Materials ETF (IYM) focuses on companies in the industrials and materials sectors. Its one-year return is 38.6%, a grade of D. Holdings are U.S. companies involved in the production of raw materials, including metals, chemicals and forestry products. Sector-specific headwinds have contributed to below-average performance for funds concentrated in these industries.
iShares Global Timber & Forestry ETF (WOOD) has the lowest one-year return (3.1%) of all ETFs shown, a grade of F. It also has grades of F for performance over the three- and five-year periods. The ETF is very concentrated, with only 44 holdings. Access to timber and forestry stocks from around the world includes a 23.1% allocation to the U.S. According to iShares, the ETF’s largest international allocations include stocks domiciled in Sweden, Japan, Brazil and Finland.
Active Management Yields Varied Results
Table 3 includes Fidelity Global Commodity Stock fund (FFGCX). The mutual fund’s portfolio managers use fundamental analysis to invest in energy, agriculture, and metals and mining commodity producers. Most holdings are categorized as large-cap value stocks. This is the only mutual fund in Table 3 to have above-average category returns for the past one-, three- and five-year periods (grades of B). The mutual fund’s top 10 holdings constitute 46.9% of its assets.
U.S. Global Investors Global Resources fund (PSPFX) has the fewest total assets and the highest expense ratio among the mutual funds shown in Table 3. It is the only mutual fund in the table with A+ Investor Grades of A for its one- and three-year annualized returns. The five-year annualized return was below average (grade of D). Foreign equities comprise 79.2% of the portfolio. The mutual fund also holds a smattering of fixed income.
Investor Considerations
ETFs and mutual funds in the natural resources sector require special considerations. Investors should be prepared to withstand the volatility of commodity price cycles, which can directly impact these funds’ returns. Geopolitical developments and global trade policies can create sudden volatility, particularly in energy and mining holdings. It’s also important to review a fund’s sector and geographic concentration, since some funds are heavily weighted toward a single resource or region.
Keep an eye on the tax-cost ratio when holding such funds in taxable accounts, and understand the nature and frequency of any distributions. Also, consider overlap: Choosing one of these ETFs that includes many of the same stocks as large- or mid-cap blend funds already held will generally lower your portfolio’s overall cost-effectiveness.
