Wind and solar power generation are two of the largest power sources in the broader field of alternative energy. Companies that operate in the alternative energy field use wind and solar power as well as biomass and other technologies. Alternative energy mutual funds allow you to get exposure to this industry without having to take the risk of choosing individual companies. You can also choose more specific funds that focus on wind or solar power specifically, or invest more broadly in the field of green companies.
Solar funds typically invest in a blend of companies that are involved in generating solar power. Many of them are global in nature, investing in solar companies throughout the world. The Guggenheim Solar ETF has only 42.3 percent of its investments in the United States, with an almost equal percentage spread between Hong Kong and China.
The First Trust ISE Global Wind Energy Index Fund invests in global wind energy companies. While two-thirds of its holdings are directly related to the wind energy industry, the balance is in companies that are indirectly related. Roughly 55 percent of its holdings were concentrated in three European countries as of October 2013.
Alternative Energy Funds
Alternative energy funds blend multiple types of green energy together, although many have a heavy focus on wind and solar. For example, the global Guinness Atkinson Alternative Energy Fund had slightly over 79 percent of its holdings in wind and solar as of Sept. 30, 2013. The five largest holdings of the PowerShares WilderHill Clean Energy Portfolio ETF are also wind and solar companies.
Broader Green Investing
Broader green funds give you exposure to wind and solar power as well as to other companies with environmentally friendly credentials. These funds might hold shares of a company that makes high-efficiency water heaters, a maker of transmission power lines, a high-tech company with a commitment to be greener in its operations or a natural food store chain -- in addition to solar and wind companies. The additional diversification may give them better performance in varying markets while still giving them solid environmental bona fides.
- Market Vectors ETFs: Solar Energy ETF
- Guggenheim Investments: Guggenheim Solar ETF
- First Trust: First Trust ISE Global Wind Energy Index Fund (FAN)
- Guinness Atkinson Funds: Alternative Energy Fund
- Invesco PowerShares: Fund Holdings -- PBW - WilderHill Clean Energy Portfolio
- WealthManagement.com: Many Green Funds Stay in the Black
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