‘Go Green’ if you want to get a greener and a cleaner tomorrow, is the global mantra. This is no less pertinent for the energy sector that utilizes mainly coal and other ‘dirty’ fuels to generate electricity.
In the wake of environmental concerns, renewable sources of energy have come into prominence. While market conditions were not in favor of alternative sources for the last two years, 2013 has been a year of stimulation for investors in the clean energy space.
Global warming and high carbon and greenhouse gas emission issues have lately resulted in rising popularity of clean or renewable energy sources, which are the world’s best available alternative to fossil fuels. Clean energy comes from natural resources, which are continually replenished, such as sunlight, rain, wind, etc.
High gas and oil prices have also brought the clean energy space into spotlight. Moreover, Tesla Motors’ (NASDAQ:TSLA) incredible surge this year has benefited some of the clean energy ETFs that give a high weighting to that stock in their basket (read: Clean Energy ETFs: The Real Bull Market?).
From an investment point of view, 2013 has seen many investors pile into the space. Despite a few hiccups, the overall trends favor the space. Nearly, all the funds in the clean energy space have had a great run this year.
Furthermore, many companies have actually seen pretty solid performances to start 2013; finally beating out more traditional energy firms in year-to-date terms.
However, investing in clean energy is quite risky and especially so from an individual security perspective. For this reason, a clean energy ETF approach could be the way to go, as this still allows for a bet on clean energy but with hopefully a more diversified and lower risk technique.
If investors like this idea, it should be noted that there are a plethora of ETFs tracking this segment currently on the market, each with their own set of pros and cons. For this article, we have selected three of the best performing clean energy ETFs that focus on the broad space, as any of these could be big beneficiaries from a continued positive trend in this intriguing corner of the stock market.
First Trust Nasdaq Clean Energy Green Energy Index (QCLN)
Launched in Feb 2007, this product follows a benchmark of clean energy companies, providing exposure to about 36 firms in total. It charges a reasonable 60 basis points a year in fees. The fund has an AUM of $61.2 million and trades in an average volume of 52,000 shares a day.
The fund holds medium-cap (50%), small-cap (35%) and micro-cap (14%) stocks. It has a maximum exposure in North America and very low exposure in Asia and Europe. The ETF is concentrated in its top ten holdings as these contribute about 61% to the fund. Tesla Motors is the top holding with about 11.4% of assets.