Investing in Solar Energy ETFs and Stocks in 2015

solar-energy-stocks

We’ve talked about why it’s important to invest in solar energy companies, but every investor knows they should never buy stock in a single company. Diversity is key to any stock portfolio. But what if there was a fund for solar renewable energy that invested in all the companies?

Is Solar Worth Investing In?

With plenty of growth over the last decade, investors should be looking toward solar, one of the most exciting industries to emerge. It’s as competitive as fossil fuels now, and as it becomes cheaper to produce, it’s only destined to grow even more.

 

The five big players in the solar industry are SolarCity, First Solar, SunPower, Vivint Solar, and SunEdison.

Between these five, it may be best to put together a diversified basket of several stocks from these companies, versus investing in one single company. That’s because although each one has its merits, no one is fulfilling everything necessary to become the ultimate solar leader in the industry.

What Solar Companies Are Leading the Way?

SunPower makes the highest efficiency panels, while First Solar isn’t far behind.  Both are able to compete for utility-scale projects. SolarCity, on the other hand, installs high efficiency panels, and has become a leader of its in residential solar. Vivint Solar has grown eexponentially along with SunEdison.

But the reason you can’t really side with any particularly company is because although some of them are involved in the installation market, not everyone is. It’s not enough to just produce or install solar panels — companies need to do both. The integrated solar company may be where the future is, and although these industry leaders are working towards that, they’re not all doing it right this second. And given the investment tax credit is expiring in 2017, it’s important to look at companies with diversity, instead of just a focus on the U.S.

What if I could invest in all solar companies at once?

Exchange Traded Funds (ETFs) are investment funds (funds of funds) traded on a stock exchange. You can choose from a wide array of ETFs, with about 20 ETFs in the energy sector. These investments are focused solely on alternative energy companies, with some of those being solar. For example, you may invest in a fund that includes a company who manufacturers the photovoltaic cells needed to make solar panels.

Solar Energy ETFs

Beyond the U.S., Germany, Canada, and Spain are paving the way for solar innovation.The S&P/TSX Renewable Energy and Clean Technology Index measures performance of companies listed with business developing green technologies, but it’s a bit broader. Market Vectors Solar Energy ETF, representing domestic and international corporations, works to replicate the yield performance of the Ardour Solar Energy Index. Additionally, the Guggenheim Solar ETF, which is based on the MAC Global Solar Energy Index, tracks companies involved in producing solar power equipment and raw materials utilized by those producers.

So how do you create the best solar portfolio? Going broad will always be the best bet, but one thing seems certain: this industry is only poised for more growth.

Note: We are not fiduciary advisors, or even advisors of any type, so please do not take this as investment advice. We also have no ties whatsoever to the investment industry.

Image credit: deerstop at Wikimedia under a Creative Commons license

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