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Alternative Energy ETFs Could Shine

To further add appeal to the sector, it appears that funding is no longer the barrier it once was. Through the American Reinvestment and Recovery Act, the U.S. Treasury Department has implemented a program that hands out cash grants in lieu of investment tax credits for renewable projects. Additionally, the Department of Energy has implemented a loan guarantee program and developed new grants for use in commercial and residential energy efficiency programs. Thirdly, numerous states have developed bond programs like the Property Assessed Clean Energy to make financing easier. Lastly, there are still some tax credits and utility rebates offered by the federal government, which add appeal to going green.

This focus on renewable and alternative energy sources will likely benefit the following ETFs:

  • Claymore/MAC Global Solar Energy (TAN), which holds companies like First Solar (FSLR).

  • PowerShares WilderHill Clean Energy (PBW), which holds companies like Trina Solar (TSL), and CREE Inc. (CREE).

  • iShares S&P Global Clean Energy Index (ICLN), which holds companies like Covanta Holding Corp. (CVA).

  • Market Vectors Solar Energy ETF (KWT), which holds companies like MEMC Electronic Materials Inc. (WFR).

    When investing in these clean energy focused equities, it is important to consider the volatility of the energy sector and the inherent risks involved in investing. To help mitigate these risks, the use of an of an exit strategy which triggers price points which represent abnormal price weaknesses and an increased likelihood that further price weaknesses are likely to follow is of importance. Such a strategy can be found at www.SmartStops.net.

    -- Written by Kevin Grewal in Laguna Niguel, Calif.

    Kevin Grewal serves as the editorial director and research analyst at The ETF Institute, which is the only independent organization providing financial professionals with certification, education, and training pertaining to exchange-traded funds (ETFs). Additionally, he serves as the editorial director at SmartStops.net where he focuses on mitigating risks and implementing exit strategies to preserve equity. Prior to this, Grewal was an analyst at a small hedge fund where he constructed portfolios dealing with stock lending, exchange-traded funds, arbitrage mechanisms and alternative investments. He is an expert at dealing with ETFs and holds a bachelor's degree from the University of California along with a MBA from the California State University, Fullerton.
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