Welcome to Episode #197 of the Zacks Market Edge Podcast.
Every week, host and Zacks stock strategist, Tracey Ryniec, will be joined by guests to discuss the hottest investing topics in stocks, bonds and ETFs and how it impacts your life.
This week, Tracey is joined by Zacks Director of ETF Research, Neena Mishra, to discuss the hottest area to invest in 2019. And no, it’s not the pot stocks, it’s clean energy.
With worries about climate change on the minds of many investors, many now want to invest in companies that are not contributing to the problem or that are finding solutions.
They want to own low carbon emitting companies, for instance. Or they want to own companies that are in solar, wind or other industries that are replacements for fossil fuels.
How can investors put their money behind their beliefs?
ETFs are Great for Investing in Niche Industries
Finding individual companies to invest in for clean energy is certainly possible, but who can really create a diverse portfolio that way?
The ETF industry is always adapting to trends so it’s not surprising that there are a handful of ETFs devoted to clean energy and low carbon investing. One has been around since 2008.
But which one should you choose?
5 ETFs to Invest in Clean Energy
1. iShares MSCI ACWI Low Carbon Target ETF CRBN has 1264 holdings so it’s a broad-based ETF. You’re going to own the FAANG stocks plus the financials. It has a relatively low expense ratio of 0.2%.
2. State Street Global Advisors SPDR Low Carbon Target ETF LOWC is similar to CRBN with the same expense ratio. It has 1,471 holdings, however but FAANG stocks also dominate its top ten holdings. It currently yields 2.5%.
3. SPDR S&P 500 Fossil Fuel Reserves Free ETF SPYX is for those who want to own the S&P 500 but don’t want to own the fossil fuel stocks like big oil companies. It has 485 holdings and a low expense ratio of 0.2%. Given that energy has been a poor performer in 2019, it has outperformed the S&P 500 index year-to-date with a return of 20.9%.
4. iShares Global Clean Energy ETF ICLN is for investors looking to invest in the clean energy concept, not to simply remove the fossil fuel investments. It only has 30 holdings so it’s a narrow niche ETF. 41% of the ETF is made up of US companies. The expense ratio is 0.46%.
5. Invesco Wilder Hill Clean Energy ETF PBW has just 40 holdings of which a majority are small cap companies. This focus on small cap names means this ETF will be more volatile. It has a forward P/E of 51.8. It has the highest expense ratio of these 5 ETFs at 0.77%.
What else do you need to know about using ETFs to invest in the clean energy revolution?
Find out on this week’s podcast.
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iShares Global Clean Energy ETF (ICLN): ETF Research Reports
SPDR MSCI ACWI Low Carbon Target ETF (LOWC): ETF Research Reports
iShares MSCI ACWI Low Carbon Target ETF (CRBN): ETF Research Reports
SPDR S&P 500 Fossil Fuel Reserves Free ETF (SPYX): ETF Research Reports
Invesco WilderHill Clean Energy ETF (PBW): ETF Research Reports
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