Alternative Energy ETF

An alternative energy ETF invests in companies which are involved in alternative energy research and production. An alternative energy ETF holds a number of stocks of companies that generate energy from environment friendly resources. Exchange Traded Funds is as compelling an investment theme as you’ll ever come across. These Alternative Energy ETFs are created and marketed just like any other ETF. The only difference is the underlying securities.

As alternative energy ETF is a green investment. With global energy demand growing sharply, oil prices at record highs, climate change concerns growing, and new technologies allowing more proficient power extraction from natural resources, the case has never been better for investing in alternative energy companies that will assist us conquer our oil and carbon-emission addictions. With more and more companies focusing on alternative energy research, the portfolio of these ETFs is becoming increasingly convincing.

Alternative energy research is in the public interest due to two reasons:

1. Depleting natural resources
2. High demand of environmental friendly products

Many companies have by now launched their eco-friendly products in the market and the rest are catching up due to the growing demand for such products. This has opened up new opportunities for investments and alternative energy ETFs are smoothing the progress of their funding and profits for investors too.

Before you buy or sell any investment product you want to be familiar with all the limitations of the asset. Understanding the benefits of ETFs will assist you utilize the right investment strategy when including exchange traded funds in your portfolio. It is equally important to understand the disadvantages of ETFs.

Advantages of Alternative Energy ETFs:

1.Alternative Energy ETFs is a green investment.
2.ETFs are tax-friendly investment. Capital gains taxes are usually lower for ETFs than usual mutual funds due to the structure of each trade.
3.ETFs perform like indexes and pursue certain market sectors. But, not like an index, you can buy an ETF with one single transaction.
4.As there is single transaction per trade, commissions are lower on an ETF as compared to an index, which involves many stocks and multiple trades. Moreover unlike regular mutual funds, there are no load fees and managing fees tend to be lower for ETFs.
5.Alternative energy ETFs are narrower as compared to other ETFs. As the requirement for alternative energy is high, a narrow investment brings in more profits than a diversified one.
6.Alternative energy ETFs is the precise way to diversify your portfolio. The high volatility and demand joined with the prospects make these ETFs the perfect hedging funds.
7.Alternative energy ETFs are best for short term traders since they are very volatile and less risky.
8.Alternative energy ETFs are very flexible, like equity, ETFs trade throughout market hours. ETFs can be sold short or on margin, and prices are continuously updated during the trading day.
9.With most ETFs, dividends are straight away reinvested back into the fund. In the case of traditional funds, the time frames may differ.

Investing in alternative energy ETFs is a profitable and a responsible investment. But, one should identify that many companies invest only a small portion of their resources in alternative energy. Hence, lot of caution must be exercised while investing in these ETFs. The underlying securities must always be checked.

Disadvantages of Alternative Energy ETFs:

1.Alternative energy ETFs has a higher expense ratio. Their higher expense ratio than usual indices makes them an expensive fund to spend in.
2.Although the U.S. has an excess of ETF products, some countries only have a few ETFs in which to invest. Moreover those regions which offer market ETFs, generally only include large-cap products leaving a lack of normal and small-sized funds.
3.In spite of many benefits to include ETFs in your portfolio, but it is very important to know that they are not the perfect investment for every situation. ETFs must be evaluated on a case-by-case basis for every investing strategy. You should understand all the risks involved with ETFs before you get started.
4.As Alternative energy ETFs tend to be narrowly focused, the lack of diversification makes them prone to huge losses.
5.The high volatility of the ETFs, obsessed by rumors and emotions, can de-motivate traders from investing long term.
6.A number of ETFs are not as actively traded as others. It may be a sector associated issue or even a regional issue. When such situation arises, it may be more useful to invest in managed fund where activity is higher.

Facts:

1.Many green technologies are becoming economically viable. For example, through the development of less expensive materials and improved production and installation methods, researchers aim to make solar cells cost-competitive with traditional electricity by 2015.[#1]

2.China has set a goal of creating 30 gigawatts of renewable energy capacity by 2020, up from 1.3 gigawatts now. [#2]

3.In 2007, for example, $18.9 billion of new money was raised in the public markets by clean energy companies — up 80% from 2006. And more than $6 billion was raised through the initial public offering of a single company.[#3]

4.Money is required to fund research and development of green technology. Money is needed to build the infrastructure that carries clean water to families and fields. In the U.S., it’s estimated that $662 billion is needed for water infrastructure from 2000 to 2019.[#4]

5.As developing nations industrialize, pollution has come to the fore. The World Bank estimates that between 2001 and 2020, nearly 600,000 Chinese a year will die prematurely due to air pollution.[#2]

6.The Chinese government estimates nearly one-third of the country’s rivers are too dirty for agricultural or industrial use.1 In addition to the human toll, the economic toll is huge — pollution and its related health problems cost China $54 billion a year.[#2]

7.Of the 11 industry segments that make up the cleantech investment category, the top five categories by total financings were solar, bio fuels, transportation, wind and smart grid.[#5]

8.Cleantech investments in North America, Europe, China and India reached $8.4 billion in 2008, up from $6.1 billion in 2007.[#5]

9.Transportation is the fastest growing source of greenhouse gas emissions in the U.S., accounting for 47% of the net increase in total U.S. emissions since 1990.[#6]

10.Eighty-six percent of the U.S.’s primary energy — the natural resources we harness for power — comes from carbon-emitting fossil fuels.[#7]

2 Responses to “Alternative Energy ETF”

  1. Julio Etzel says:

    Great Webpage for stocks articles and posts. Really enjoyed it alot and plan on coming back again, so keep up the good work!

  2. ETF List says:

    ETFs are the best way to invest- not too high commission rates and stupid pointless middlemen involved…

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