In the past, traditional energy companies represented excellent investment opportunities for savvy individuals. With more importance being placed on green sources of energy, an individual may be considering investing in alternative energy. When considering an alternative energy investment, most individuals are faced with three investment products to choose from including mutual funds, ETF’s, and stocks. Each of these options represents certain advantages and disadvantages over the next and it is up to the individual investor to determine which best fits his or her needs. Climate change, political pressure, and the demand for new sources of energy all represent compelling reasons to consider alternative energy investments.
Mutual funds may be the best way to invest in alternative energy for individuals that have time for their investment to grow incrementally. Individuals that are interested in investing a lump sum or who want absolute transparency in their investments should consider ETF’s, or exchange traded funds. ETF’s make it possible for an investor to know exactly which companies their money is going to. Purchasing individual stocks is a good way for an individual to make a concentrated investment, but they are much more volatile and place the individual at a greater risk of losing their money.
There are also specific industries that fall under the umbrella of alternative energy which may represent unique investment opportunities. For instance, an investor may have a personal interest in such alternative energies as geothermal energy, wind, or solar energy. By purchasing ETF’s, an investor can determine exactly which corporations his or her money goes to. An investor that has a preference for solar energy, for example, but who does not have a favorable opinion of ethanol will have the opportunity to focus his or her investments on that particular energy while avoiding the other.
When it comes to investing in any type of energy, whether it is alternative energy or more traditional types, an investor should carefully and thoughtfully consider every purchase. As with any other type of investment, there are risks associated with placing money in alternative energy investments. An individual should never invest more money than they can comfortably afford to lose. By carefully researching each company and gaining a better understanding of the way that stock is traded, a person can make a better decision regarding when and how much of their money they are going to invest. Savvy investors understand that when it is done correctly, it is possible for the benefits to outweigh the risks of investing.