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A Clean-Energy ETF

Stocks in this article: PBD

One of the best ways to do this is with the PowerShares Global Clean Energy Portfolio (PBD). The fund tracks the WilderHill New Energy Global Innovation Index, which lists companies that focus on greener, generally renewable sources of energy and technologies that facilitate cleaner energy production. In total, the fund invests in nearly 100 companies, with a heavy concentration in industrials, utilities and IT firms. This approach could be ideal for some investors because, unlike other funds in the alternative-energy space, this fund will benefit no matter which technology wins out.

Many of the fund's top components do not invest in alternative fuels at all but, instead, invest in companies that are finding ways to make current processes "greener" and more energy efficient. These companies, such as Universal Display Corp. (PANL) and Meyer Burger Technology AG, could be great investments even if solar and wind power do not take off the way many are expecting. This approach could potentially take out some of the volatility that is associated with solar and wind power and allow investors to benefit from technological innovation instead of the often-politicized process of the energy world.

For investors seeking a broad way to invest in the clean-energy market with less of the politics and none of the worries about which power will ultimately win out, PBD could make an excellent choice. In fact, the fund has outperformed all the other broad ETFs in the category this year, save one: iShares S&P Global Clean Energy Index (ICLN). The ICLN, however, has a beta that's higher than PowerShares' product and short-term volatility readings, which are far higher than PBD's, suggesting that over the long-term, PBD could be the way to go for investors who seek a fund that invests in cleaner and greener technologies but with minimal volatility levels.

At the time of publication, Johnston had no positions in any of the securities mentioned. Michael Johnston is the senior analyst and founder of ETF Database, a Web-based investment resource providing actionable ETF investment ideas and an ETF Screener for investors analyzing potential ETF investments. Johnston oversees ETF Database's free ETF Newsletter, one of the most popular sources for news and commentary focusing exclusively on the exchange-traded fund industry. Johnston also maintains and develops content for ETFdb Pro, a line of analyst reports and model portfolios designed to help investors utilize ETFs to meet their investment goals.

Johnston has completed the Chartered Financial Analyst (CFA) program, and obtained his bachelor's degree in finance from the University of Notre Dame. Prior to founding ETF Database, Michael worked in a private client service group performing valuations of companies operating in a wide range of industries.

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