How you could become mega-rich by investing in these companies
This is a classic mistake often made by amateur investors. Because something is popular or in big demand, the assumption is that shares in it with be a good buy. They rarely are.
The big peril is over-entry. Suppliers see a goldmine and rush in to supply the assumed demand. But the increased supply cuts the price and most of the new suppliers will go bust.
And there are other perils. China is already an efficient producer of lithium and could increase their supply to the market any time -- thus undercutting and bankrupting other suppliers.
Mining shares of any kind are risky and lithium is one of the riskiest. A cautious investor buys nothing unless it has a solid track record
Australian share market investors are perfectly positioned to benefit from the transition to net zero carbon emissions despite the nation being a major coal exporter to China.
The International Monetary Fund said the surging demand for renewable energy in the coming decades would be good for Australia because the nation has plentiful supplies of lithium, cobalt and nickel.
The minerals are particularly important for battery storage power that will underpin the success of solar and wind energy eventually replacing coal-fired power stations.
In a new report on the World Economic Outlook, the IMF singled out Australia for special mention along with Chile, and to a lesser extent Peru, Russia, Indonesia, and South Africa.
'Countries that stand out in production and reserves include Australia for lithium, cobalt, and nickel,' it said.
Bell Direct senior market analyst Jessica Amir said now was the time to consider investing in lithium miners before more governments around the world, including Australia, introduced more substantial electric vehicle subsidies.
'This is a huge investment opportunity and this will be the hot investment opportunity for the next decade,' she told Daily Mail Australia. 'Thirty per cent of an EV car is the battery and there's a huge lack of supply of lithium and then you've got the world pivoting and pushing to being carbon neutral.
'Clean energy must have a place in investors' portfolios because we're going to see a huge amount of government stimulus going to it, we're going to see a huge uptick in consumer demand.
'You have to remember the basics of investing: a company is based on its future earnings potential, this means that companies that are in this area, they're going to see future earnings growth and share price growth.'