Investment experts preach that a diversified portfolio is a smart portfolio. Investors purchase commodities and invest in different industries in order to diversify their holdings. One thing some investors should consider is adding renewable energy stocks. Whether this is a good idea depends on their investment strategy.
Some investors purchased renewable energy put options during 2010 as a bet that the market would decline. Since the market has been rather flat this year, those investors saw their put option portfolio go down. Therefore, using renewable energy put options as a hedge against a market decline was not a good idea.
Investors who are simply seeking to add renewable energy stocks for the purpose of diversification may fair better. They should focus on the clean energy sectors that are being relatively ignored by most investors. These include alternative transportation (like mass transit), energy efficiency, and electric grid sectors. Putting some money into batteries/storage, wind, geothermal, waste/biomass, and other renewable sources will add further diversification.
An alternative to investing in individual stocks within each of these sectors is to put money into exchange-traded funds. Examples are the First Trust Global Wind Energy Index, Powershares Global Progressive Transport Portfolio, and First Trust NASDAQ Clean Edge Smart Grid Infrastructure Index Fund. This eliminates the need for the individual to engage in stock picking, something that could be quite time consuming within all of these sectors.
As far as how much of the portfolio to invest in the renewable energy arena, that is an individualized decision. It depends largely upon the investor’s market expectations, risk tolerance, and why the individual desires to invest in renewable energy (aside from diversification). The motivations may include fighting global climate change, being environmentally responsible, or peak oil scenarios. Renewable energy is still in its early stages so investors may want to start small.
I'll Personally Email You
For just 15 minutes a week, I'll teach you everything there is to know about investing in mining companies. Plus, I'll include free guides on building a passive income, preparing for inflation, getting out of debt fast, and finding real financial security.
Plus, if you ever want to talk or ask any questions, I'll respond personally -- usually within an hour. Oh, and all of this is free. Just sign up right now:
investing
Leave a comment
You must be logged in to post a comment.