The recent rise in energy consciousness has given way to more solar energy-focused exchange traded funds (ETFs).
The latest slew of funds invest in specific technologies, and Matthew Hougan for Index Universe analyzes the two ETFs providing access to the solar market.
Claymore/MAC Global Solar Energy Index (TAN) and the Market Vectors Solar Energy (KWT) tout the same expense ratios at 0.65% and offer global solar energy exposure.
Both indexes aim to proved global exposure to the solar energy market. They were also constructed with "screens": TAN requires components to generate at least one-third of their income from the solar industry. Companies that generate more than 66% of their revenues from solar are weighted at their full market cap. Companies between 33% and 66% are weighted at half their market cap.
KWT tracks the Ardour Index and takes a simpler approach. Companies must generate 66% of their revenue from solar energy to be included at all. KWT’s components are all pure plays.
There’s no way to tell which fund will ultimately do better, though, and the case could be argued either way. In a fund made entirely of pure plays, those companies could lose out to larger conglomerates. It could be more sensitive to changes in solar, making the potential for returns (and losses) greater. TAN could be less volatile, with broader exposure and more upside potential.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Mr. Lydon serves as an independent trustee of certain mutual funds and ETFs that are managed by Guggenheim Investments; however, any opinions or forecasts expressed herein are solely those of Mr. Lydon and not those of Guggenheim Funds, Guggenheim Investments, Guggenheim Specialized Products, LLC or any of their affiliates. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.