How to Invest in Alternative Fuels
Political turmoil, limited supply of crude oil and refinery failures can contribute to the rising prices that you see at the gas station each time you fill up. Combined with cost inflation, the environmental impact of greenhouse gases has also sparked interest in alternative fuels, leaving open an opportunity for you to invest. Though investment options in alternative fuels are relatively scarce, they can help you to diversify your portfolio.
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Instructions
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Decide which type of alternative fuels you want to invest in. You can find publicly traded companies that specialize in hybrid technology, hydrogen fuel cells, solar or wind power, ethanol production, geothermal energy, hydropower and biodiesel.
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Examine the composition of energy funds. Some of these mutual funds may consist of both traditional fuels and alternative fuels. This combination can balance the fund's investments and minimize the financial risk that you may face if you invest in the fund.
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Consider investing in an alternative fuel fund. A limited number of alternative fuel funds are available and are actively managed. As a result, your money will be invested in different stocks over time as the fund managers reallocate the investments.
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Review the past performance of the alternative fuel stocks or funds in which you are interested. Certain stocks and mutual funds may fit better with the timeline that you have for your investment goals. Morningstar ratings can provide you with information about the expected performance of the investment and its risk (see Resources).
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Select the stocks or funds that you want to purchase. Your choice may be based on both the financial performance of the investment opportunity and its social implications.
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Place a buy order with a brokerage house with which you have an account. Specify the number of shares that you want to purchase and choose whether to have the order executed immediately or only when the price falls below a certain level.
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Tips & Warnings
Some alternative fuel stocks and funds may not have a sufficiently long track record for you to review. You may need to conduct additional research to assess their likely performance.
While you may support the development of certain alternative fuels, it is important to maintain a well-balanced portfolio. This will insulate you from significant fluctuations in the prices of alternative fuel stocks and funds.
