In dealing with the energy sector, most of the attention is given to oil. It is no secret that the price of oil is known by just about everybody out there. If you own a vehicle and you drive to work, you are well aware of the price of gasoline, and gasoline price is directly affected by the price of oil.It is important to note that because oil is a limited resource, many governments, countries, and companies are actively seeking alternative energy sources to implement. Such energy sources might include geothermal, solar, and wind power. These alternative sources, currently, are too cost prohibitive to implement on a wide scale. As technology improves, future alternative energy prices will continue to drop, making them more and more attractive to countries and consumers.
If you are an investor looking to add alternative energy exposure to your investment portfolio, there are a few ways you can do this. Many mutual funds will have holdings in certain energy companies. Most of the big energy companies are heavily levered in oil, but also have holdings in clean energy as well. While you won’t be able to find specific alternative energy mutual funds, there is an easier method to add alternative energy exposure to your portfolio quickly and easily.ETFs, or exchange traded funds, are an investment vehicle that allows you to add diversity to your holdings without the fees and taxes that are associated with mutual funds. ETFs can be traded intraday, and can usually be tailored to fit your needs. For example, let’s say you are an investor that is looking to add specifically clean energy holdings to your portfolio. The PowerShares WilderHill Clean Energy ETF (PBW) is a fund that has holdings in strictly clean energy companies that involve solar, wind, geothermal, etc. This is a great example of how ETF’s can be used to specifically add exactly what you want.There are many different alternative energy funds available on today’s stock market. The above example shows the ability to add broad alternative energy exposure to your portfolio. If you want to get more specific, there are also several options. The PowerShares Global Wind Energy ETF (PWND) is a fund that tracks holdings of wind energy companies. The Market Vectors Solar Energy ETF (KWT) is an exchange traded fund that tracks holdings of solar energy companies. If you want to add exposure into the nuclear field, the Market Vectors Uranium + Nuclear Energy ETF (NLR) is the ETF for you.
As you can see, you can add broad alternative energy exposure or specific exposure to your portfolio easily through the use of ETFs. They are a great way to introduce yourself to this market sector. As always, it is your responsibility to research each of these funds before purchasing them. Do your homework and make sure you are investing your money wisely.Disclosure: The author does not hold any of the funds in this article in his portfolio at the time of this writing, and doesn’t anticipate making any transactions in the next 72 hours.