How to Invest in Solar Power
Many investors feel that our future energy needs will be met largely by solar power, and if you agree, investing in solar power companies and mutual funds can be a smart play. There are a number of mutual funds, exchange traded funds and individual companies doing business in the alternative energy space, and devoting a portion of your stock market portfolio to those companies can allow you to make a bet on a green future.
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Consider investments in mainstream companies that do a portion of their business in the solar energy arena. For instance, CNN recently reported that Applied Materials, which is predominately a maker of semiconductors, could be a smart play for those who believe solar power is the wave of the future.
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Limit your risk by investing in mutual funds focused in the alternative and green energy industries. A mutual fund invests in dozens, or even hundreds, of companies, and this strategy can limit specific stock risk. If you purchase an individual stock, there is always a risk that the company will go out of business. With a mutual fund you are part owner in all the companies owned in the fund, and the chances that all of those companies will go bust is negligible.
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Research the outlook for the solar power industry and understand the factors that could positively and negatively effect the returns those in the industry are able to achieve. Some of the many factors that could reduce or increase the prospects of those companies include new discoveries of oil, political turmoil in energy producing countries and political volatility over government investments in solar power.
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Contact several mutual fund companies and brokerage firms about their minimum investment requirements and the costs of investing. By shopping around you can find brokerage firms that charge as little as $7 per trade, and those low costs can leave more money in your pocket. When choosing a mutual fund, look for one that has a good track record and a low expense ratio.
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Consider purchasing shares in a solar ETF. An ETF is an exchange traded fund, which is basically a mutual fund that can be bought and sold like a stock. One advantage of using an ETF instead of a mutual fund is the fact the ETF can be bought and sold in real time during the trading day, allowing you to determine the exact price you pay when you buy and sell.
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