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A Complete Guide to Lithium Stocks

  • Utsav Mishra
  • Feb 11, 2022
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The world is changing! What do you think of when I say this? You are free to think of whatever you can. From the technological world to the financial world, things have changed. You can try and look around yourself and I am sure you will find a million things that can prove the statement that I just stated. 


For example, look at your phone. You can look at the changing models of phones. From landlines to the latest smartphone we have seen everything change. 


Similarly, when we look at the financial world, we will see a lot of changes. For example, consider the investment sector. Earlier people used to invest in big firms for a surety that their money won't get lost. Then came the era when people started to invest in coal as they used to produce energy. But, as time changed people started to look for more and more options.


As technology changed, and smartphones became a necessity, there was one thing or mineral whose demand increased. As demand for phones increased, so increased the production of batteries for these phones. And these batteries were made up of a specific mineral. 


Because of these batteries, the demand for that mineral increased, and with that, a new type of investment opportunity rose, i.e, “The Lithium Stocks.” As we dive deeper and talk about the whole investment process, let us first try and understand what Lithium stocks are.


What are Lithium Stocks?


The shares of firms that mine or process lithium are known as lithium stocks. Traders are unable to invest in lithium as a commodity, unlike other precious metals such as gold and palladium. Investing in publicly traded lithium firms, on the other hand, can provide them with exposure. This is analogous to uranium stockpiles and actual uranium.


Lithium is mostly obtained from spodumene mines or brine deposits. Australia has the most spodumene mines, despite being one of the world's greatest producers of lithium. The majority of brine production takes place in South America. Lithium carbonate and lithium hydroxide are the two major kinds of lithium manufactured by enterprises.


As demand develops, producers are concentrating on making lighter, faster devices while also being mindful about the sorts of lithium utilised in their manufacturing. 


The demand for lithium has risen dramatically in an environment where renewable technology is quickly advancing and large companies such as Tesla rely on lithium as a fundamental component of their products.


Whereas some traders are concerned about future market instability, others see investing in lithium as a fantastic way to profit from an industry that has witnessed a tremendous surge in demand.


Traders can buy lithium mining stocks, which are shares in firms that mine lithium, or lithium battery stocks, which are shares in companies that develop batteries. It's also feasible to buy and sell shares of corporations participating in both. (here)


Also Read | Guide to floating stocks


How to Invest in Lithium Stocks?


Purchasing shares of firms in the lithium industry and holding them for a long time in the hopes of making a profit is the traditional technique of investing in lithium. Alternatively, you can use spread betting or CFDs to trade on the fundamental price fluctuations of lithium stocks. 


Spread betting is a tax-advantaged technique of gambling on the price movements of underlying assets without having to take ownership. CFDs allow traders to buy or sell multiple units of an instrument, with the difference in price being swapped at the contract's end.


  1. Make an account with a trading platform


You need to register a live trading account first in order to spread, bet, or trade CFDs on lithium stocks.


  1. To identify the best stocks for you, do some research


Keep up with the latest lithium and industry news with our news and analysis tools.


  1. Decide on a strategy


Based on your trading strategy, determine your entry and exit points. You can choose to 'go long' and purchase or 'go short' and sell based on how the instrument's price changes.


  1. Take precautions to reduce your risk


Before you make a deal, be sure you've read and understood the risk management rules.


  1. Decide on the size of your position and execute the trade


Apply any risk-management orders, such as stop-loss orders, to your trade and confirm it.


  1. Keep an eye on your trade and make sure it's closed at the right time.


If your position is profitable, you should consider adhering to your trading plan and exiting when the goal price is reached.


To know more about how to invest in lithium stocks, watch this:

Lithium Stocks to Watch


According to the article, we are providing you with the top-3 lithium stocks to buy, which as explained can explode in near future and fire up your portfolio.


  1. Albemarle Corp. (ALB)


Lithium is the most abundant element on the planet. According to a US Securities and Exchange Commission filing, Albemarle, based in Charlotte, North Carolina, is a "preferred global lithium partner" because of its ability to scale, geographical access to the global lithium market, and low-cost operating resources.


  1. Livent Corp. (LTHM) 


It is another of the more well-known lithium technology businesses. With its high-performance lithium products and solutions, the company serves a variety of markets, including aircraft, medicines, and industrial. 


In November 2021, Livent introduced LIOVIX, a patented lithium metal product that can increase the performance of lithium-ion batteries while lowering manufacturing costs and ensuring environmental sustainability. 


The development of new technologies in this area demonstrates that there is still room for additional innovation in battery technology, and Livent is a global leader in this field.


  1. Sociedad Química y Minera de Chile (SQM​​)


Sociedad Qumica y Minera de Chile, a Chilean chemical firm, is one of the world's largest lithium producers. 


The company, which was founded in the late 1960s, benefits from the fact that its home country contains one of the world's greatest lithium reserves. 


Due to the rapidly increasing demand for lithium in the electric vehicle industry, Sociedad Qumica y Minera de Chile expanded its lithium production to include both carbonate and hydroxide, which it produces in the Salar de Atacama in Northern Chile. The corporation also profits from its potassium nitrate and iodine production.


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Every time, anywhere you invest, the thing that always crosses your mind is that, what if I won’t get my money back. You first try to look at the cons of investing anywhere. 


Whether it is a mutual fund or a stock. The same is the case with lithium stocks. It is now and that’s why however attractive it may seem, people won’t invest in it without looking at the cons.


So, on an end note let us look at the cons or risks of investing in lithium stocks.


Also Read | Liquid funds: working and benefits


Risks in Lithium Stocks


Investing in lithium is not completely safe. There are a few reasons such as cobalt risks, the geopolitical scenarios, and then running out of lithium as a metal, that make lithium stocks sometimes really risky. Also, the high prices remain a concern. But one can ignore these to invest in the much fired up lithium stocks.


Investing in lithium may provide buying opportunities if it fits into your long-term investing strategy and does not conflict with your risk tolerance.


Lithium is a valuable commodity, according to market participants, due to its wide range of applications and projected demand from electric vehicles. However, because you can't trade the commodity directly, there are a few layers of research to understand its market value.

Next Read | What is Investment Analysis?

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