Which Copper ETF Is Right For You? JJC vs. CUPM vs. CPER

Whether it be through our wiring systems, plumbing, or circuit boards, copper is a commodity that we simply have grown to depend on in our day to day lives. This reddish-brown metal has grown tremendously in popularity as its relatively cheap price and widespread industrial and manufacturing uses make it one of the most important metals in human development. In addition to copper wires and piping, the industrial metal is used in key automobile parts, heating and cooling systems, as well as telecommunications equipment.

Copper’s numerous applications make the commodity a potentially lucrative play on both the manufacturing and industrial goods sectors. And with the rapid development of the exchange-traded fund industry, investors now have several ways to gain access to the arguably most useful industrial metal. Below, we outline the three most popular copper ETFs and which one will fit your investment objectives [see also Jim Rogers Says: Buy Commodities Now, Or You’ll Hate Yourself Later].

DJ-UBS Copper Total Return Sub-Index ETN (JJC)

Quick Stats (as of 8/9/2012)

With its total assets equal to over 48 times that of the next largest competitor’s portfolio, JJC is hands down the king of copper ETFs. The $114 million fund exchanges hands just over 76,000 times a day on average. Its inception in 2007 makes it the oldest copper exchange-traded product on the market as well as one of the most popular options among investors. JJC rolls out exposure to front month copper futures, which currently are the Copper High Grade futures contracts traded on the COMEX. It is important, however, to note JJC’s exchange-traded note structure: since an ETN is a debt instrument, investors will be exposed to the potential credit risk of the issuing institution [for more copper news subscribe to our free newsletter].

JJC is Right for You if: You are an active trader seeking to either speculate on copper’s movements or quickly execute positions in the metal.

Pure Beta Copper ETN (CUPM)

Quick Stats (as of 8/9/2012)

Although not nearly as large as JJC, CUPM does offer a unique alternative to investing in the reddish-brown metal. Since its inception last year, the fund has accumulated just over $2.4 million in total assets. On an average day, the fund maintains a trading volume of 400 shares. Similar to JJC, CUPM invests in copper futures contracts, but utilizes a flexible roll methodology. The fund’s index allows it to roll a number of futures contracts with varying expiration dates. Additionally, CUPM utilizes its Pure Beta methodology, which bases decisions on observable price signals and the slope of the copper futures curve. Like JJC however, CUPM is also an ETN and investors should be aware of the potential credit risk exposure of the issuing institution.

CUPM is Right for You if: You are an investor seeking to gain exposure to copper futures, but want a methodology that can help avoid the adverse effects of contango. 

United States Copper Index Fund (CPER)

Quick Stats (as of 8/9/2012)

CPER is another popular copper ETF, offering exposure to copper prices through futures contracts, but in a very different way. The first major difference lies in the fund’s structure: CPER is a limited partnership that actually holds copper futures contracts. With this structure, the fund holds no credit risk, but does expose investors to tracking error relative to the underlying index. Additionally, holders of CPER will be required to submit a K-1 come tax time. Perhaps one of the most appealing features of CPER is its “dynamic” methodology, which allows the index to make appropriate futures contract allocations based on current market conditions. Lastly, CPER is the cheapest fund on our list with its expense ratio of only 65 basis points [see also Warning: Ignore Bill Gross’ Hard Money Prediction At Your Own Risk].

DBS is Right for You if: You are a cost conscious investor looking to achieve copper exposure without the nuances of an exchange-traded note structure. 

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Disclosure: Photo courtesy of Jonathan Zander. No positions at time of writing.

About Daniela Pylypczak

Daniela Pylypczak-Wasylyszyn is a regular contributor to CommodityHQ.com, where she primarily focuses on commodity producers equities. She is also an analyst for ETFdb.com, where she contributes articles and analysis each week. Since joining the team in 2011, Daniela has quickly grown to be one of the most widely-followed authors in the industry. Her articles are syndicated in a number of online publications, including Financial Advisor Magazine, Fidelity.com, and Yahoo! Finance. Daniela is also a contributor for TraderHQ.com and Dividend.com. Daniela graduated from DePaul University with a bachelor’s degree in finance and economics.
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