ETF Talk: Going Green Follow-Up

Last month, I introduced you to what has become one of the hottest, most talked about exchange-traded fund (ETF) sectors — green ETFs. As many of you already know, I live in California, and around here it seems like everyone’s thinking green. A growing number of exchange-traded funds now are designed to let investors "go green" in more ways than one.

Alternative energy ETFs allow you to go green by making money, but they also can help the environment at the same time. Last month, I featured one such fund — the Claymore MAC Global Solar Energy (TAN) — which launched in April of this year. This fund is positioned to benefit from the growth of the solar power industry. That growth already is taking place, reflected by the solar sector’s 46% average annual rise between 2001 and 2006. Indeed, the gains in the solar industry helped solar stocks to soar in 2007.

Despite the gains seen in solar stocks during 2007, the sector is young, and the stocks still are very volatile. But if you are comfortable enduring the risks that flow from investing in new technology, and if you don’t mind volatility, solar ETFs may be worth considering after the recent pullback.

The table below lists the top alternative energy ETFs, including solar. As you can see, 2008 hasn’t been the greatest year for these funds. Yet despite this year’s declines, I think alternative energy funds are definitely worth tracking.

Now because of the volatility in the above funds, I still am not currently recommending any of them in my investment advisory services. However, I do think that the alternative energy sector will have its time to shine. When that time comes, I know I will "go green" in a big way — first to help the environment, and second to help your wallet. (Or should that order be reversed?)

If you have any questions about ETFs that you’d like me to answer and that you think might interest the rest of my readers, click here and I may be able to do so in an upcoming ETF Talk feature.