2 easy ways to buy-and-hold lithium shares: expert

Renewable energy generation and storage seems to be the future. So how do you invest in it for the long term?

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There are many ASX and overseas shares for investors who want to put money into the growing demand for lithium, rare earths and batteries.

Far too many choices, many would argue.

Like any resource stock, lithium producers can be hit-and-miss, depending on the very binary fortunes of their mines.

With this in mind, Shaw and Partners portfolio manager James Gerrish had two suggestions as to how one could make a safer long-term bet on the trend.

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How to avoid picking lithium losers

"I do like the lithium story longer-term but like all new industries there will be some big winners and losers," he told his Market Matters newsletter.

"Hence if I was simply looking to 'buy and hold' long-term I would more likely consider an ETF covering a basket of stocks."

The first example he had in mind was a US stock called Global X Lithium & Battery Tech ETF (NYSEARCA: LIT).

Despite the "battery tech" in its name, the ETF is very much focused on lithium.

"The Global X Lithium & Battery Tech ETF invests in the full lithium cycle, from mining and refining the metal, through battery production," reads its fund summary.

"The Global X Lithium & Battery Tech ETF (LIT) seeks to provide investment results that correspond generally to the price and yield performance, before fees and expenses, of the Solactive Global Lithium Index."

Global X Lithium & Battery Tech ETF closed Wednesday morning at $80.53. That's more than 21% up this year and 214% higher than 5 years ago.

The second suggestion Gerrish had was closer to home.

"There is a lithium & battery technology ETF on the ASX called ETFS Battery Tech & Lithium ETF (ASX: ACDC)," he said. 

"It holds lithium stocks as well as companies involved in batteries."

This fund also follows a Solactive index but has a broader remit than Global X.

"The Solactive Battery Value-Chain Index represents the performance of companies that are providers of electrochemical storage technology and mining companies that produce metals that are primarily used for the manufacturing of battery-grade lithium batteries," read the fund's product page.

"Demand for energy storage is being driven by the movement towards emissions reduction and renewable energy."

The ETFS Battery Tech & Lithium ETF is an equal-weighted fund, meaning all the constituent shares take up roughly the same amount of capital on each rebalance.

Shares for ETFS Battery Tech & Lithium ETF were going for $91.27 on Wednesday afternoon, which is 9.6% up for the year. The fund has gained 82.7% since listing in September 2018.

Motley Fool contributor Tony Yoo owns shares of ETFS Battery Tech & Lithium ETF. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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