The world runs on energy, and since the turn of the 20th century the bulk of the world's energy has been derived from fossil fuels. There is a lot of concern, particularly amount young adults, about the effects of burning fossil fuels on the environment, coupled with depleting natural resources, according to the International Institute for Sustainable Development. This concern has spurred investments in alternative energy sources, such as wind, solar and geothermal. Harnessing the power of these resources requires a massive investment that is beyond the scope of most individual investors, but you can still participate in the alternative energy sector by investing in companies that are involved in solar, geothermal or wind power.
Do Your Homework
There are plenty of companies that have exposure to solar, geothermal or wind energy technologies. Some have significantly more exposure than others, while some are focused solely on alternative energy production. The alternative energy industry is still in its infancy, and like all emerging technologies, there are huge risks involved, coupled with the possibility of equally large rewards. Always thoroughly investigate any company you are considering investing your money in. Contact the company's investor relations department and request a copy of its annual report. Check out its long- and short-term stock price history. Make sure the company's goals and objectives match yours before you invest a dime.
You can gain exposure to solar, geothermal or wind energy companies by investing in alternative energy sector mutual funds or exchange-traded funds. Like all such funds, these sector-specific mutual funds provide you with a diversified portfolio of stocks and offer professional management of your funds. This doesn't relieve you of the responsibility of doing your homework. Before you invest, contact your investments broker or the fund itself and request a prospectus. This document gives you important information regarding the fund's investment objective and management focus. It lists the securities held in the fund's current portfolio, so you will have an idea of the types of companies the fund's manager will invest in. The prospectus also shows you how the fund has performed in both short- and long-term settings.
You can invest in publicly traded solar, geothermal or wind energy companies. mutual funds or ETFs in the same way that you invest in any other similar security. You will need a investments brokerage account to buy stock or ETFs. You can also buy many mutual funds through your broker, but you can buy shares of many mutual funds directly from the fund itself without the need of going through a broker.
Tax credits might have been a driving force in some companies' decisions to invest financial resources in the development of solar, geothermal and wind energy. Provisions of the American Recovery and Reinvestment Act extended the eligibility dates of certain tax credit for facilities producing electricity from wind, geothermal and other renewable energy sources through the end of 2012, but there is no guarantee that such tax credits and other incentives will continue in force. If tax credits dry up, it is possible that some companies will cease investing in the alternative energy sector.
- Solar Industry: Global Renewable Energy Investment Sector Faces Challenging Year
- American Council on Renewable Energy: Private Sector Investment in Renewable Energy -- a Good Business Decision?
- WSJ MarketWatch: Best and Worst -- Energy Sector
- Internal Revenue Service: Energy Incentives for Businesses in the American Recovery and Reinvestment Act
- International Institute for Sustainable Development: Who Are the Green Consumers?
Mike Parker is a full-time writer, publisher and independent businessman. His background includes a career as an investments broker with such NYSE member firms as Edward Jones & Company, AG Edwards & Sons and Dean Witter. He helped launch DiscoverCard as one of the company's first merchant sales reps.