Can Alternative Energy ETFs Prove Their Worth?

The alternative energy ETF is an investment that many people are turning to in today's economy. This type of investment is one that has been generally regarded to have some potential in the future. Here are the basics of the alternative energy ETF and what you should expect from it in the coming years.

Alternative Energy ETF's

An alternative energy ETF is an exchange traded fund that invests in companies that produce alternative forms of energy. For example, this type of ETF might invest in companies that produce equipment for wind turbines. It might also invest in companies that produce solar equipment or even individual alternative power companies. Basically, the ETF will profit if alternative energy makes a move for the better.

Replacing Oil

This type of fund is tied directly to the oil market. When the price of oil went down, these funds had some problems. However, as the economy continues to recover, you should expect the price of oil to go up as well. When this happens, people are going to start putting more emphasis on alternative forms of energy. At this point, alternative energy ETF's could potentially bring in a nice return on investment.

Oil is a resource that is limited. Therefore, at some point we will have to decrease our dependent on it as a planet. As forms of alternative energy are introduced, the planet will start to rely less and less on oil. When this happens, those that invest in alternative energy ETF's will be able to bring in some nice gains.

Government Incentives

This type of fund has one major advantage over other ETF's. Alternative energy is something that governments across the world are putting an emphasis on. Many governments have started programs that provide incentives for companies and individuals to use alternative forms of energy. The United States Treasury has implemented a program to provide grants to those that wish to start renewable energy projects. Other governments such as China, are putting an even bigger emphasis on alternative forms of energy. They are investing $450 billion into wind and solar power. If you are trying to implement the use of solar or wind power in China, they will pay a large portion of the bill for you. They will pay as much as 70% of the cost of a solar project for you. Therefore, if you are investing in companies that are working with alternative forms of energy, governments around the world are helping your investment.

Governments are also enacting laws that will require the use of alternative forms of energy. For example, in California, energy companies have to make 33% of their energy from renewable resources. As this trend continues, more and more governments will require alternative forms of energy being used.

Technological Advancements

Technological advancements are also playing a role in the alternative energy sector. As technology increases, alternative forms of energy will become more readily available. When this happens, those that are investing in the alternative energy sector could benefit from a boon in the value of their investments.

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