Few deny that in terms of long-term growth potential, the green energy sector and exchange traded funds (ETFs) are close to the top. That’s why, when it comes to certain fund providers, it may be slow and steady that ultimately wins the race.
While there are several funds that take a more narrow focus when it comes to the alternative energy sector, broad green energy funds may be the ticket to steady performance in a still-growing sector. [Why Nuclear is Making a Powerful Statement.]
Market Vectors Global Alternative Energy ETF (NYSEArca: GEX) has been unable to get going as well, despite its diversification. The fund has $180 million of assets under management and serves both individual and institutional investors who want to invest in renewable energy. The fund invests in 30 companies listed on an alternative-energy index that the company bought in 2006 from Ardour Capital Investments LLC, reports Cassandra Sweet for The Wall Street Journal.
The fund’s recent lackluster performance is directly tied to investor activity in renewable energy stocks. Nothing more, nothing less. Overcapacity in the solar and wind sectors has weighed down stocks, while Germany’s government plans to wind down subsidies for solar power.
Don’t let that fool you, though: climate change is serious business. So many sub-sectors are moving in fits and starts, though, that if you want more stable performance, a broad fund may be the ticket. If you’re banking on one of the narrower sectors, keep in mind that it increases your risk and the potential for volatility is heightened. [How to Play Obama’s Clean Tech Plans.]
For more stories about alternative energy, visit our alternative energy category.
- PowerShares WilderHill Clean Energy (NYSEArca: PBW): A primarily mid- and small-cap stock ETF that holds a broad mix of wind and solar companies, companies that build alternative fuel vehicles, and companies that design and sell silicon wafers.
- Market Vectors Global Alternative Energy ETF (NYSEArca: GEX)
- First Trust Global Wind Energy (NYSEArca: FAN)
- PowerShares Global Wind Energy (NYSEArca: PWND)
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. 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.