If you haven’t done a lot of research into the alternative energy sector, use this article as a resource on learning about this investment option. Alternative energy is a sub-sector of the energy sector. By definition, alternative energy includes energy sources that are alternatives to our main source of energy now – fossil fuels. Some examples of alternative energy are:
- solar power
- wind power
- hydroelectric power
- nuclear power
- biofuels
It is widely acknowledged that fossil fuels will eventually run out. While best estimates give us decades before that happens, turmoil in the middle east and a growing world demand leave a lot of unease when it comes to oil. Developing and implementing these alternative energy sources would bring independence from fossil fuels.
Because we will eventually have to implement one or all of these examples to satisfy the world’s energy consumption needs, investing in alternative energy will most likely bring future gains. Finding the right move will largely be reflected by finding the companies that are on the move, research-wise.
One way to invest in alternative energy is to look at mutual fund options. Mutual funds hold a diverse portfolio of whatever the fund is focused on. Alternative energy mutual funds would have holdings in different alternative energy companies, ranging throughout the entire sector (wind, solar, etc.). However, investing in alternative energy mutual funds has its drawbacks. Mutual funds have high fees, generally have low gains and dividends, and it is difficult to find a truly ‘alternative’ energy fund out there. Most mutual funds associated with energy stocks have oil company holdings.
Another way is by investing in alternative energy funds through ETFs. ETFs are attractive because they can be completely customized and traded like regular stocks. No fees are associated with them, and they can be as focused or diverse as your portfolio requires.
When investing in alternative energy funds, be sure to understand what fund will best fit your needs, as well as which funds can bring the best rewards in the future.