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TheStreet Open House

Green Mutual Funds Could Beat Market

Stocks in this article: GE UTX SI

The Guinness fund has favored solar stocks since 2006, which has dragged the fund down in the past year. The portfolio also has a little exposure to wind power with turbine maker Vestas Wind Systems (VWDRY).

Picking a fund requires investors to predict the direction of alternative energy. If you think solar energy will lead a rebound then the Guinness fund might be the best choice. If you think green technology will take the limelight, the Winslow Green fund might be the way to go.

A year ago, I called solar stocks and exchange-traded funds faddish. They had had a great run, but they seemed overextended. After all, solar power won't be affordable for widespread use for years. The companies' stocks have dropped more than the broader market in the past year.

Investors need to realize that adding alternative energy companies to a diversified portfolio will create volatility. This helps on the way up, but it will hurt on the way down.

At the time of publication, Nusbaum held shares of United Technologies through a client portfolio, although positions may change at any time.

Roger Nusbaum is a portfolio manager with Your Source Financial of Phoenix, and the author of Random Roger's Big Picture Blog. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Nusbaum appreciates your feedback; click here to send him an email.

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