ETF Trends CEO Tom Lydon discussed the Invesco Solar ETF (TAN) on this week’s “ETF of the Week” podcast with Chuck Jaffe on the MoneyLife Show.
Solar energy has been a hot topic for some time now, with companies scrambling to make use of this clean and unlimited energy source. Solar power is energy from the sun that is converted into thermal or electrical energy. Solar energy is the cleanest and most abundant renewable energy source available, and the U.S. has some of the richest solar resources in the world. Solar technologies can harness this energy for a variety of uses, including generating electricity, providing light or a comfortable interior environment, and heating water for domestic, commercial, or industrial use.
For those investors interested in participating in the solar space using ETFs, The Invesco Solar ETF seeks investment results that correspond generally to the performance, before the fund’s fees and expenses, of the MAC Global Solar Energy Index. TAN generally will invest in all of the securities comprising the index in proportion to their weightings in the index.
ETF Trends CEO Tom Lydon explains, “There’s been a huge not only additive interest in renewable energy, but most importantly, added interest in stocks that represent that space. TAN is an index made up of those stocks and is up over 40% this year.”
TAN is based on the MAC Global Solar Energy Index (the “Index”). The Fund will invest at least 90% of its total assets in the securities, American depositary receipts (ADRs) and global depositary receipts (GDRs) that comprise the Index. The Index is comprised of companies in the solar energy industry. The index is computed using the net return, which withholds applicable taxes for non-resident investors. The Fund and the Index are rebalanced quarterly.
“According to Allied Market Research, the global solar energy is expected to hit $422 billion in just a couple of years. So that’s almost 5 times what it was in 2015. So it’s growing strong, there are a lot of companies that represent the space, and as we’re always looking for companies that might show some current trends, especially trends that are stronger than maybe the S&P 500, it’s always good to notice them, talk about them, and for investors, whether it’s a long term buy or you want to do some tactical allocation, it’s fun to talk about,” Lydon added.
Solar energy has become a global phenomenon, with Europe largely leading the way.
“There are countries around the world that are making some pretty good strides. As an example, on April 22 in Germany they set a record when 77% of the energy from the country came from renewable sources. That put it well on its way to hit its goal to average 65% of all energy consumed on an annual basis by 2030—pretty substantial,” Lydon said..
One potentially overlooked benefit of the ETF is that it may be particularly attractive to younger, more environmentally conscious generations, and could even serve as a bridge for connecting families based on their economic and social objectives.
“Say you’re in your 60’s or 70’s and you’ve got grand-kids, and you’d like to maybe appeal to their wants, their needs, their values. There are many millennials out there that are saying we need to move in this direction. Now not only can you appeal to the values by highlighting those types of companies, but you can profit from them,” Lydon commented.
For more podcast episodes featuring Tom Lydon, visit our podcasts category.