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Green Energy Investment - Getting StartedGreen energy and green technology have become hot sectors of global stock markets. Here is some basic guidance for those who are new to this area of investment. First off, if you are completely new to investing you might want first to check out some of the gazillions of websites and books that provide an introduction to the stock market. And are you really sure that you know enough to be investing directly into company shares? If not, it might be better to put your money into mutual funds. What Is It? A lot of different expressions get thrown about - green technology, green energy, renewable energy, alternative energy, future energy, greentech, cleantech. And, unfortunately, a lot of different definitions get thrown about too. Most investors would agree that green technology investment incorporates renewable energy companies such as those involved in wind energy, solar power or geothermal energy. You can also generally include firms in the water treatment, recycling, energy storage and energy efficiency businesses. But what about, say, clean coal? Or natural gas? Or oil sand? Some investors include nuclear energy. Indeed, what about ethanol, once seen as a relatively clean petroleum substitute, but more recently regarded as partly responsible for global food shortages. There are many gray areas, and essentially it is for each individual investor to decide where he or she stands on these issues. This website concentrates on those businesses that are listed in the left-side column. Why Is It So Popular? A combination of a soaring oil price and fears of peak oil, the green movement, new technology and the growing price competitiveness of alternative energy sources is behind the boom in green energy investment. And just as many consumers are now willing to pay extra for, say, solar energy, because they believe it helps the environment, so too are some investors looking to direct their funds into companies that produce the goods and services that protect the environment. Much of the lead has come from Europe, where countries like Germany, Spain and Denmark have invested heavily, and some of the leading stocks are in these countries. However, the United States is starting to catch up, and more recently nations like China and India have also been producing some exciting sharemarket opportunities. Reliable figures are hard to come by, but the Clean Edge consulting firm has estimated that in 2007 total revenues for the solar photovoltaic, wind energy, biofuel and full cell businesses totaled $77.3 billion, up from $55 billion in 2006. It expected this figure to jump to $254.5 billion within a decade. New Energy Finance consultants have estimated that global investment in new energy technology rose from $92.6 billion in 2006 to $148.4 billion in 2007. Green Energy Investing and Socially Responsible Investing SRI - socially responsible investing (also called ethical investing) - has been in vogue for a couple of decades. There is a large overlap with green investing, but there can also be differences. Essentially, SRI equates to investments in companies that "do good" - that is, they do not produce tobacco products, alcohol or weapons, they treat their employees well, they do not exploit poorer countries, and so on. (There can be many definitions.) Green investing usually - very broadly speaking - judges a stock on whether it is involved in somehow helping the environment. And not every "green" stock will be a perfect employer, and may not even be especially environmentally sensitive itself. Examples are several of the numerous solar power product manufacturers in China, which have been shown to be quite substantial polluters themselves. Will I Make Money? Something of an assumption abounds that green energy investment, no matter how worthy it might be, does not really make much money. Of course, if you are investing in individual stocks, then much depends on your own stock-picking abilities. But several green funds are developing solid records of strong profitability. The NASDAQ Clean Edge U.S. Liquid Series Index was launched in November 2006 to track the performance of stocks involved in clean-energy technologies. In 2007 it rose 66.7 per cent, compared to 3.5 per cent for the S&P 500 Index and 9.8 per cent for the NASDAQ Composite Index. The WilderHill Index, which also tracks the clean energy sector, was in May 2008 up 89.2 per cent since its launch in August 2004. The Drawbacks Finally, here are a few of the negatives of green energy investments: * Many of the stocks are tiny. Many are new. Often there is little information available about them. They can be very thinly traded. The technology is moving so fast it can be hard to keep up, or predict which stocks will emerge as winners. * This has become quite a speculative sector. Many - probably most - of the companies involved are not making much, or any, profit. You are buying for future profits. Some stocks are on quite large price-earnings ratios. Some experts say that green energy investing is becoming like the dot-com bubble. * As noted, many stocks are tiny. But some of the leading companies are huge, and their green technology business is a relatively small part of their total turnover. General Electric - a leader in wind energy - is a clear example. * European companies have taken the lead in this sector, and now Chinese companies are arriving in force. Many of the best investment opportunities might lie overseas. |
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