Many advisors may be surprised to see a clean energy ETF topping VettaFi’s list of the 100 Highest 5-Year ETF Returns.
The Invesco Solar ETF (TAN) has returned 205.4% over a five-year period ending October 25, the highest five-year return out of all ETFs. The next best-performing ETF, the First Trust NASDAQ Clean Edge Green Energy Index Fund (QCLN), is trailing TAN by nearly 2,000 basis points (QCLN has returned 186.3% during the same period), according to VettaFi.
The clean energy sector is poised for continued growth. The passing of the Inflation Reduction Act in August promises to offer a raft of tax credits to help stimulate the adoption of clean energy technologies, as well as spending for low-income and minority communities that suffer disproportionately from pollution.
TAN delivers targeted exposure to companies in the solar energy industry. Over a three-year period, TAN has returned 135.2%. TAN is down 11.7% year to date but has increased 18.1% since its relative bottom on May 12, according to YCharts.
The fund includes 46 securities as of October 24, including First Solar Inc (FSLR), Enphase Energy Inc (ENPH), SolarEdge Technologies Inc (SEDG), Array Technologies Inc (ARRY), and Sunrun Inc (RUN).
Companies eligible for inclusion in TAN’s underlying index include solar power equipment producers, including ancillary or enabling products such as tracking systems, inverters, batteries, or other solar energy storage systems; suppliers of raw materials, components, or services to solar producers of developers; companies that produce solar equipment fabrication systems; companies involved in solar power system installation, development, integration, maintenance, or finance; companies that produce hydrogen using solar energy; companies that produce solar-powered charging systems for electric vehicles or other electrical devices; companies selling systems that use solar thermal energy to produce heat or electricity; and companies that sell electricity derives from solar power, according to the regulatory filings.
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