Top Renewable Energy ETFs
Get to know how to make money on renewable energy exchange-traded funds. What is a clean energy ETF? How to invest money in alternative energy stocks reasonably? Which funds are more likely to bring you profit? We have done our best to provide you with answers for these and other related questions.
Top Clean and Renewable Energy ETFs to Purchase
Renewable energy exchange-traded funds are an attractive option both for those who would like to invest into a promising sector and for environmentally conscious investors. There is a wide range of renewable energy applications, among them are supplying power to electric grids, charging EVs, and many others. Clean energy firms generate solar and wind energy, manufacture batteries for electric or hydrogen vehicles, etc. All of them change the way to meet the human need for power.
Today, alternative energy ETFs are becoming especially prospective due to boosting demand for green energy sources driven by the problem of global warming, decreasing reserves and rising prices of conventional energy resources, and multiple governmental programs.
Just like back in 2008, many investors see sustainable energy as a reliable investment choice in the current volatile period. Green energy producers conclude long-term PPAs for supplying electricity to state grids and well-established businesses, which guarantees stability and low level of risk to their returns.
How to Invest in Clean Energy ETFs Wisely?
Clean energy ETFs follow the performance of indices including stocks of alternative and clean energy firms. While buying the stocks of an individual company can be too risky, ETFs mitigate the risks associated with entering the niche.
There are renewable energy ETFs that have shown double digit gains in the previous year. In Q1 of 2020, some prices have increased by more than 40 percent. Anyway, it is reasonable to look ahead over a long period, since short term share price changes are typical for such new and specific market segments. During the last decade, clean energy ETFs’ annual returns have fluctuated between 1-3% losses and gains, and the tendency is likely to continue for the nearest years.
Though most renewable energy ETFs invest in similar energy sources, they buy stocks of different holdings. That is why you should be cautious as to which funds to invest in. One of the optimal approaches is to purchase ETFs with multiyear track records (no less than a dozen of years) and high AUMs (at least $200mln).
Let’s take a look at some of the most prospective clean energy ETFs.
The ETF is mostly focused on wind and solar companies, but its portfolio is more diversified than that of other listed funds. Benchmark index is S&P Global Clean Energy Index, which consists of around 40 renewable and clean energy stocks globally. Top holdings are SolarEdge Technologies, Enphase Energy, Companhia Energetica de Minas Gerais, First Solar, Vestas Wind Systems, and Xinyi Solar Holdings. The fund was established on 24/06/2008. Assets Under Management are roughly $667.5mln, expense ratio is 0.46 percent. YTD returns constitute 34.49 percent. The current share price is 11.03 USD.
Index tracked is WilderHill Clean Energy Index, composed of 39 stocks of multicap USA-based firms specializing in energy conservation and cleaner energy. Some of the top holdings are Tesla, Enphase Energy, Ballard Power Systems, NOVA, and NIO. The ETF was founded on 03/03/2005. The issuer is Invesco. The fund has AUM of $322.1mln. Its expense ratio is 0.71 percent. YTD returns are reported to be 52 percent. Annual dividend-price ratio amounts to 0.86 percent. Three-month average daily trading volume is 72,957.
The ETF has the same issuer as the previous fund – Invesco. It mainly specializes in the solar sector. Index under track is MAC Global Solar Energy Index, including multicap businesses focused on solar energy from all the world over. However, most of them are Chinese or American. Enphase Energy, First Solar, and Solaredge Technologies are among its top holdings. Invesco Solar was incepted on 15/04/2008. TAN is one of the most expensive funds, its expenses amount to 0.7 percent. At the same time, this ETF is among the biggest in the industry. Assets Under Management are about $456mln. The price per share traded is 29.63 USD. The fund has YTD returns of 59.64 percent, annual dividend-price ratio of 0.26 percent, and three-month average daily trading volume of 201,916.
The fund tracks CIBC Atlas Clean Energy Index, comprised of small cap Canada and United States-based companies involved in alternative energy industry. Enphase Energy, Tesla, and Ormat Technologies belong to the ETF’s top holdings. ACES was launched on 29/06/2018, the issuer is ALPS. It has AUM of $152.5mln, and expenses of 0.65 percent. Year-to-date returns are 53.4 percent, three-month average daily trading volume is 22,589. Annual dividend-price ratio is 1.56 percent.
Index followed is NASDAQ Clean Edge Green Energy Index, consisting of clean energy firms based in Canada and USA. The ETF has the following top holdings: Tesla, Enphase Energy, and Brookfield Renewable Partners. The fund has assets under management of $228.5mln. The expense ratio is 0.65 percent. The launch date is the 8th of February, 2007.
The fund deals with companies engaged in the wind sector. It follows ISE Global Wind Energy Index. Top holdings include Orsted, Vestas Wind Systems, and Northland Power. The inception date is 16/06/2008. The ETF has AUM of $99.95mln and expenses of 0.62 percent.
To sum up, renewable energy ETFs can be a valuable addition to diversified investment portfolios. Anyway, in order to reduce risks, avoid investing over 5 percent of your assets into a single sector. And do not forget that the industry is much younger than conventional energy and still requires much testing. That is why price fluctuations and market risks can be rather high, compared to broad-market indexes.