Investors considering exchange-traded funds focused on renewable energy stocks have several things to consider.
These include geographic and sector exposure, depth, fees, weighting methodologies, and more. One of the funds in this category that ticks a lot of boxes in a positive way is the ALPS Clean Energy ETF (ACES).
One of the points in favor of ACES is that many of its holdings are innovators in their respective industries, including solar and wind power.
“Solar power generation could provide up to 40% of the country’s electricity in the next 15 years, according to the US Department of Energy“, says David Kastner by Charles Schwab. “Better solar and wind storage systems developed by various companies are already enabling more of us to harness the energy generated on our own rooftops, come rain or shine.”
Another issue for investors to consider when evaluating a fund like ACES is how government policies and investor demand affect and potentially create clean energy trends.
“Amid public insistence and global agreement, more government funding for clean energy incentives and mandates is on the way. In addition to regulation, many companies are already moving towards more environmentally friendly practices in response to consumer and investor demand,” Kastner adds.
ACES, which tracks the CIBC Atlas Clean Energy Index, is home to several companies that are credible innovators and disruptors, including many in solar and wind. These industries combine for nearly half of the fund’s weighting. This is relevant for investors, as they are among the groups driving innovation in renewable energy and clean technology.
“Solar and wind companies are developing new technologies to make renewable energy cheaper and more efficient, and new energy sources (like green hydrogen, which is made with water) can be added to the mix” , notes Kastner.
Another key for investors is to avoid getting caught up in the hype that often surrounds renewable energy investing. Yes, there is growth to be had here, and the spending expectations are jaw-dropping, but it’s best to have a long-term view of this industry.
“Be sure to separate companies that walk the talk from those that just talk, or investigate mutual funds or ETFs that do this for you. Consulting current research from trusted sources, as well as paying attention to clean energy news and trends, can help you evaluate the opportunities described above based on your own priorities and appetite for change. risk,” concludes Kastner.
Other renewable energy ETFs include First Trust Global Wind Energy ETF (FAN) and the SPDR Kensho Clean Power (CNRG) ETF.
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Opinions and predictions expressed herein are solely those of Tom Lydon and may not materialize. 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.