Since today we are talking about Exchange-Traded Funds (ETFs), I figure this question I received from Mike from Clever Dude would be a good one to answer. Mike asks,
“I’ve been wanting to invest in renewable energy. I don’t buy individual stocks, but I saw an ETF “ECO” that I’m interested in. First, how do I proceed in investing in this ETF, and second, do I have better options (maybe switch those two questions around)? BTW, I use eTrade right now, and I’d buy through my Roth IRA. “
How to Buy an ETF
First before getting into renewable energy and ETFs I want to explain that buying an ETF is as easy as buying a stock. I wrote an article on how to place a stock trade online, and with an online stock broker like Etrade, the process is as easy as the article depicts.
A common misconception with ETFs is that they are complicated and confusing like mutual funds, but the reality is they are the direct opposite. Associate ETFs not with mutual funds, but with stocks. Their prices fluctuate throughout the day like any other stock, have issued shares, the whole nine yards. An ETF simply tracks an index, commodity, or group of stocks under one symbol.
Bottom line: Buying an ETF online is as easy as buying a stock online, type in the symbol, amount of shares, and place your order.
Renewable Energy ETFs
I looked up “ECO” through yahoo finance and the web but could not find anything on this ETF. What I can suggest though if you want a renewable energy ETF is to check out one of the following:
- PowerShares WilderHill Clean Energy (PBW)
- Progressive Energy Portfolio (PUW)
- Cleantech Portfolio (PZD)
- First Trust NASDAQ Clean Edge ETF (QCLN)
The biggest and most widely held and well known out of those listed above the PowerShares WilderHill Clean Energy (PBW). It has a market capitilization of about $750 million versus the others who are all less than $40 million. Buying into PBW will eliminate a lot of the added volatility of the others, and if renewable energy continues to grow it will be a solid long term investment.
Some other notes about the other three, QCLN just started trading in February 2007 and only has a market cap of about $20 million. PUW and PZD aren’t too much bigger, and have been trading longer. Down the road there may very well be several other renewable energy ETFs released, but only time will tell when they will come about.
(Have a stock question of your own? Send it to me at ” Blain . Reinkensmeyer at gmail . com ” and I’d be happy to answer it here on the blog or via email for you)