Alternative Energy ETF

Alternative Energy exchange traded funds are publicly traded investment funds (sometimes called holding companies) with asset derived share prices. The assets are made up of securities and other forms of interest in companies considered part of the renewable energy industry (some companies are more involved in the clean energy industry than others). They must be involved in the production, research or development of clean energy or associated technologies. The funds that focus more strongly on specific sectors of the renewable energy industry are less diversified than others.

As a result of the industry being in its initial stages there is much risk involved with these types of investments (many processes that show promise get derailed by high unexpected costs in later development while others have a hard time getting approved due to regulations). The alternative energy sector inevitably will experience major growth (when nonrenewable sources stop meeting the energy demands of a growing population) but the big question is how bad do problems associated with nonrenewable sources (instability in places like Iran, reduction in ratio of reserves to energy demand, pollution) have to get before people and governments show a large scale shift in attention and behaviour. When fuel prices rise more people consider alternative energy but when they fall so does consumer interest. (Alternative Energy ETF)

Advantages

No trade fees as with Mutual Funds, can be tax friendly, more exposure to the market with fewer transactions, many places such as Europe have plans/goals of increasing dependence on alternative energy sources.[1] Because many countries are behind on their goals there is a lot of growth to be realized.

Disadvantages

Generally less diversified than other ETF's, high volatility. When energy prices fall the industry loses interest in alternative energy sources and technology for many reasons among them the lack of supporting infrastructure (fuel stations specifically for hybrid, battery operated vehicles) and high startup costs (solar panels and windmills have high manufacture, installation and maintenance costs).

References

  1. [1]

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