Rare Earth Elements and Critical Minerals: Why an ETF Might Outperform Individual Stock Picking

The global demand for rare earth elements and critical minerals is soaring, but the risks of betting on single mining companies are equally steep. Here’s why a diversified approach through an exchange-traded fund (ETF) deserves serious consideration.

The Supply Crisis Nobody’s Talking About

The United States faces a critical dependency: roughly 80% of rare earth elements are processed in China, and Beijing has already weaponized export restrictions on select minerals. Meanwhile, demand from semiconductor manufacturing, electric vehicle production, renewable energy infrastructure, and defense contractors continues to accelerate. The U.S. government has responded by injecting capital into domestic supply chains, even taking stakes in companies like Lithium Americas, MP Materials, and Trilogy Metals to secure national security interests.

For investors, this creates an asymmetric opportunity: either chase individual mining plays with massive execution risks, or gain exposure through a diversified rare earth elements fund.

Mining Stocks: High Reward, Brutal Reality

Individual mining companies face headwinds that most equity investors underestimate. Developing a new mine requires 10+ years of permitting, environmental approval, and capital expenditure often exceeding $1 billion. Commodity price swings can wipe out margins overnight. Production delays are endemic. Geopolitical risk is real—especially when competing against Chinese producers with state backing.

This is why the VanEck Rare Earth and Strategic Metals ETF (NYSEMKT: REMX), trading since 2010, offers a compelling alternative. The fund tracks companies deriving at least 50% of revenue from rare earth and strategic metals production, with 29 holdings and a 0.58% expense ratio—reasonable for the sector.

Inside REMX: A Portfolio Built for the Supercycle

The top holdings tell the story of where capital is flowing:

Lynas Rare Earths (OTC: LYSDY), Australia’s largest rare earth producer, anchors the fund at 7.52% weighting. The company operates Mt. Weld mine and processing facilities across Australia and Malaysia. YTD 2025 performance: up 220%, with a five-year return of 524%.

Pilbara Minerals (OTC: PILBF) follows at 7.18%, running lithium mines in Australia and Brazil. Up 58.7% YTD but 631% over five years, signaling sustained conviction in lithium demand.

MP Materials (NYSE: MP), the only rare earth mining operation on U.S. soil at Mountain Pass, California, commands 7.14% and is up 354% YTD. Wall Street projects profitability by next year as rare earth elements become strategically irreplaceable.

Albemarle (NYSE: ALB) and Lithium Americas (NYSE: LAC) round out the top 5, combining stable lithium production with pre-commercialization upside in Nevada’s Thacker Pass mine.

The portfolio’s top 10 holdings account for 62.2% of assets. Year-to-date 2025, REMX is up 88.4% versus 16.7% for the S&P 500—a 5x outperformance.

ETF vs. Single Stock: The Math

Consider Netflix’s 2004 entry into Stock Advisor’s top 10 list: $1,000 invested then would be worth $590,357 today. That’s the power of being early. But timing one mining company perfectly? Statistically harder than threading a needle blindfolded.

With REMX, you’re hedged against single-company execution failures while maintaining full exposure to rare earth elements’ structural tailwinds. The fund’s 97.3% five-year return versus 111% for the S&P 500 reflects sector volatility—but also proves mining equities can significantly outpace broad markets during commodity upswings.

The Bottom Line

The rare earth elements supercycle is real. China’s export restrictions, U.S. government support, and insatiable demand from tech and defense create a favorable long-term backdrop. Individual mining stocks are a moonshot; an ETF is a calculated bet on structural change.

For investors with conviction in rare earth elements but low tolerance for binary outcomes, REMX deserves space in a portfolio.