How Bright Is the Future for Solar ETFs? | ETF Trends

During a time of global meltdown, very few people would keep an eye out on solar stocks and exchange traded funds (ETFs), but a market lingering around its lows may just be the incentive to keep solar energy for the long haul.

Solar technologies can be deployed either through the building stock as load-abatement or in a vast solar park which no other power generating technology can match using these two methods, writes Charles Morand for Seeking Alpha. But this is not without consequence as solar energy taxes our ailing power grids.

Because of market uncertainty, a potential investor is better off investing in a solar ETF:

  • Claymore/Mac Global Solar Index ETF (TAN): down 69.2% since April 15th inception

ETF TAN performance

  • Market Vectors/Van Eck Global Solar Energy ETF (KWT): down 67.6% since April 23rd inception

ETF KWT performance

This way an investor may circumvent the arduous and time-consuming process of analyzing any one company in particular if he or she is not familiar with the sector. The portfolio characteristics inherent to ETFs also allow for spreading of risk.

The average holdings for TAN’s 25 stocks ammounts to 4% of the total fund and KWT with an average holding accounts for 2.86%. But risk for the KWT’s top 10, 64% of fund value, is a bit higher compared to TAN with around 58% for its top 10 holdings.

The investors looking for a possibility of a lucrative payday with green on their minds might look to ETFs with the greatest exposure to water, silicon cell and thin-film segments which have higher barriers to entry because of more complex tech requirements. It is noted that investors should stick away from heavy weightings in silicon because of its commodity nature, as well as modules/installation ends of the market, because of low barriers to entry and labor-intensiveness.

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.