There are plenty of mutual funds and exchange traded funds (ETFs) trading now that give investors exposure to clean energy. And with the price of oil lately, many may be thinking about an alternative. Which fund suits you or your goals is up to you. Basically, a clean energy fund is one that primarily invests in companies involved in renewable energy, energy efficiency and conservation, efficient and alternative fuel vehicles, and companies that are part of the supply chain for any of the above sectors, says Tom Konrad for Renewable Energy. [Clean Energy ETFs Could Get Hit By Cuts.]
Some funds invest in environmental services/waste management, recycling, water, and natural gas utilities. Waste management, recycling, and water each fit rather well into the clean energy context: Municipal solid waste is an excellent source of renewable biomass, which can be seen as renewable energy. Can you see where this is going?[Green ETFs: In The Eye Of The Beholder?]
What makes a fund green depends on the investor and what they are considering a clean energy investment. When choosing a clean energy ETF it is best to consider the size and liquidity of the fund. The reason to buy an ETF instead of common stocks is to achieve quick and easy diversification at relatively low cost, and this would make a global play more sensible than a domestic play. Tom Konrad for Alt Energy Stocks breaks some of the ETFs down:
- PowerShares WilderHill Clean Energy (NYSEArca: PBW) Traders speculating on short term gains will like this fund. It is the best vehicle due to its high liquidity.
- Market Vectors Global Alternative Energy (NYSEArca: GEX) This ETF becomes cheaper over long holding periods.
- PowerShares Cleantech Portfolio (NYSEArca: PZD) If you are a long term investors, this fund probably has the best balance of allocation to promising sectors and low cost.
- iShares S&P Global Clean Energy Index Fund (NYSEArca: ICLN) For the long term investor more interested in Renewable Energy than Energy Efficiency and Cleantech.
Tisha Guerrero contributed to this article.
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