Alternative Energy Mutual Funds - Overview

By: Ryan Narendra

Broadly speaking, there are two key aspects of alternative energy adoption. The most obvious is technological, and much effort has been spent not only making the technology more economical, but in choosing the right solution for any given situation. The other broad aspect of alternative energy adoption is economic, and involves providing incentives for change before other factors force it. Many economic measures are being adopted to spur these changes, of which alternative energy mutual funds are but one.

Alternative energy mutual funds work just like any other, in that they invest consumers' money in a portfolio of companies. The companies, in which they invest, however, are concerned with developing technologies and infrastructure for the use of energy sources not derived from fossil fuels. In some instances, alternative energy mutual funds broaden their scopes to invest in companies which are either environmentally friendly, or are working to clean up the environment in some way.

Alternative energy mutual funds performances are measured just as with any mutual fund, though the benchmark indices are specifically designed for alternative energy. The Alternative Energy Index in particular takes renewable energies and clean technologies into account. Additionally, traditional markets create indices for alternative energy and environmental cleanliness evaluation, one example of such being the Dow Jones' World Alternative Energy Index which tracks the 20 largest renewable energy stocks. Finally, there are indices from other third party organizations, each of which track factors of importance to each specific group.

There are many lists of alternative energy mutual funds available online, of which the below are a few examples. The Claymore MAC Global Solar Energy TAN ETF is an Exchange Traded Fund which invests in companies in the solar energy sector. It does so based on the MAC Global Solar Energy Index, a metric designed specifically for tracking a company's performance relevant to solar energy advancement.

Similarly, the Power Shares Global Wind Energy Portfolio invests in wind energy, as well as in companies using the clean power those results. In this way, not only does the mutual fund help advance the state of the art, but it provides encouragement for other, unrelated companies to use the cleaner electricity.

For a less specific approach not focusing on one alternative energy source, consider the New Alternatives Fund. Founded in 1982, this fund not only has the possible advantage of being non-specific, but its nearly three decades of experience make it an old pro in a relatively new investment sector. Not only does it invest in alternative energy, but also in environmental protection.

Before investing in an alternative energy mutual fund, it is important to learn as much as possible about the strategies available, their tradeoffs and future prospects for growth. The possibilities in this arena in particular are rapidly evolving, with new technologies radically shifting the possibilities and associated costs. Past and current performance of a given mutual fund is certainly a good indicator, but if new technologies make one alternative much more appealing, or if another is slowly falling out of favour due to adverse environmental impact, then your knowledge in alternative energy matters may be key in saving your investment.

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Alternative Energy Mutual Funds

alternate energy mutual funds

Alternative Energy Mutual Funds - Overview

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