The ETFs on this list are focused on clean energy solutions. Narrow focus : Unfortunately, lots of ETFs that claim to be socially responsible or environmentally friendly are filled with the same components as large index funds, often at a much higher expense.The best alternative energy ETFs share a few common characteristics: If you want to see efficiency like Vanguard or Fidelity index funds, you’re going to be disappointed. Plus, spreads are high since these funds have large investments outside the United States. The current batch of ETFs in this space all sport high fees and spreads, since the companies they invest in are often small and illiquid. Only a small number of alternative energy ETFs are currently available for trade, but that total will rise in the years to come. No, they invest in the companies that actually research and develop clean energy innovations. Alternative energy ETFs don’t invest in companies that are merely good corporate citizens. Many socially responsible funds still have tech companies like Apple, Microsoft, Amazon and Facebook as their largest holdings, which offer little diversity. What Makes a Great Alternative Energy ETF? Still, if making a difference in the world is your investing mission, renewable energy ETFs can be a core component of your portfolio. Many are small funds with only a handful of underlying companies, so note the pros and cons of this type of investing. These funds invest in companies that work with clean energy sources like solar and wind power in order to reduce greenhouse emissions. Renewable energy ETFs are a great tool for environmentally-concerned investors. A hot-button issue for these investors is pollution and many ETFs have picked up on this trend. There’s an ETF for every nook and cranny of the market, but a growing crowd of investors voice concerns about the impact their underlying companies have on the environment.
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