Photo:Taylor Dundee, Creative Commons, Flickr
One of the trends in ethical and environmental investing right now includes alternative energy ETF investing. Not too long ago, I wrote about ETFs with regard to the PowerShares WilderHill Clean Energy ETF (PBW). ETFs allow you to buy and sell funds on the stock market, much as you do stocks. One of the newer offerings in terms of alternative energy ETFs is the Market Vectors Global Alternative Energy ETF (GEX). This ETF is based on the stocks of 30 companies that are involved in alternative energy. This can include anything from technological development of alternative energy to the production of biofuels. The only requirement is that at least 50% of the companies' revenue comes from alternative energy activity. The need for exclusively environmental behaviors is not necessary. Some of the companies tracked include Aventine Renewable Energy Holdings, Inc. (AVR), Headwaters Incorporated (HW), Evergreen Energy Inc. (EEE), and VeraSun Energy Corporation (VSE). The Global Alternative Energy ETF is designed to track the Ardour Global Index (AGIXL).
ETFs do come with fees, even though they are traded as stocks. And while the Market Vectors Global Alternative Energy ETF is too new for a Morningstar rating, the fees associated with the ETF include a management fee of about 0.65% annually. It is also worth noting that GEX offers something that is a little different from other alternative energy ETFs, namely an emphasis on large caps. Most other alternative energy ETFs rely on small to mid caps. Additionally, GEX has a rather international reach: less than 42% of the companies in the ETF are American (most are European).
Bottom line: Even though ETFs are popular right now, they are losing value. The risky nature of ETFs, and especially alternative energy ETFs, mean that there is a higher risk of loss. However, if you have the risk tolerance for it, with the decline in value (GEX is dropping somewhat rapidly today) it might mean good values. And even though there is potential in the future, just about every company in the Global Alternative ETF is losing ground today. And, of course, watch out for the fees. But, to their credit, most ETFs charge fewer fees than most mutual funds.
Disclosure: I am interested investing in PBW, though I do not have shares right now. I do not own shares in any other companies listed above.