When it comes to exchange traded funds(ETFs), is it in style to be green?

The clean energy market is growing faster than ever, and fund companies are right on the  money, launching so-called green funds. Some say that being green means being too narrow, too focused and just plain volatile.

Claymore S&P Global Water Fund (CGW) has been criticized for being too focused on small companies within a narrow sector. The fund is down 5.3% year-to-date. Likewise, the solar energy ETFs that have hit the market can also take the narrow path, with both the Claymore/Mac Global Solar Energy Index (TAN) and the Market Vectors Solar Energy (KWT) offering similar solar exposure, with the same expense ratios.

As Gary Gordon on ETF Expert  points out that, by definition, a sector fund is supposed to be concentrated. And as the awareness grows, the number and selection of funds will, too. That’s the beauty of ETFs – you can pick and choose what works for you. It’s been a rough year so far for this sector, but many are feeling optimistic about the long-term prospects as concern about global warming gathers steam.

Just be sure not to have your portfolio overweight in a particular sector, and always keep an eye on those areas that are performing. Protect yourself by not getting in until the 200-day moving average has been crossed and get back out when it drops below that line or 8% off its high.

Other green ETFs include:

• First Trust NASDAQ Clean Edge (QCLN), down 23.7% year-to-date
• Market Vectors Environmental Services (EVX), up 0.4% year-to-date

Tags: Dividend ETFs, Energy, Green ETFs, Sector ETFs, Water