Investing in an emerging sector like renewable energy is higher-risk. One way to invest in renewable energy is to buy shares in the companies producing the power. Remember investing in smaller companies in general is more risky, not all will succeed and the performance is more volatile.
That makes their shares more difficult to buy and sell. Investing in them also normally requires large sums, making them off-limits to most everyday investors. Investment trusts can be a way to get around this. We think investment trusts are a good way to invest in renewable energy.
Specialist managers and teams use their experience and expertise to invest in a range of companies they think have the best long-term potential. Some trusts focus on one type of renewable energy, such as wind or solar, while others invest across a range of renewables. You can search for investment trusts on our website. Investments rise and fall in value, so you could get back less than you put in.
Senior Investment Analyst Kate Marshall shares our analysis on the manager, process, culture, cost and performance of European Opportunities Trust. Home News Articles Investing in renewable energy — a powerful investment? Investing in renewable energy — a powerful investment?
Jonathon Curtis , Investment Analyst. Forecast global energy consumption. Existing client? Please log in to your account to automatically fill in the details below. Title: Please select First name:. Not only does that make energy a basic industry but it makes it a strategic one as well. If you are looking to build a truly balanced portfolio it would be hard to imagine having one without including an allocation in energy. The energy sector includes oil and natural gas, nuclear power, and increasingly renewable sources such as wind and solar power.
There are times when energy seems more important than others, such as during times of supply disruption or a war that involves large energy producing nations. The most fundamental investment strategy is to buy low and sell high. You can do exactly that — or at least the buy low part — when the news on a stock sector is quiet, like it is now. Once a major energy related story hits the media, energy stocks will begin to take off quickly. Energy is one of those sectors that seems particularly prone to high volatility on the upside.
This may be because there is considerable emotion attached to energy prices, which itself is because energy affects everyone. Though energy stocks usually perform best during periods of international turmoil, they also have solid long-term potential. Energy prices are affected by both economic growth and by inflation.
Though neither situation may cause energy prices to rise quickly, both will cause higher prices over time. Economic growth increases demand for energy. That puts upward pressure on energy prices and on energy stocks. The economy has been coming out of the recession slowly, but if that growth begins to accelerate energy demand will increase. As it does, prices will also increase driving energy stocks higher.
Inflation is more of a monetary phenomenon. While we think of it in terms of higher prices, the reality is that it means cheaper dollars. The world pays for oil in US dollars and if the US is devaluing the currency, oil exporters will demand higher prices for oil. When oil prices rise all things energy-related rise. While energy seems like a simple concept, investing in it can be anything but. For most people, investing in energy through funds will be the better choice.
Your only concern will be how much of your portfolio to allocate toward energy and when to sell when the time comes. That will free you to concentrate your efforts on the job and in the industry that you know best. You can follow your energy investments from the sidelines while leaving the more complicated details to people who know best. And both buying and selling of your positions will be much easier.
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It also controls renewable energy yieldco NextEra Energy Partners NYSE:NEP , which provides additional investment capacity because it can sell contracted clean energy assets to its affiliate for cash to reinvest in new opportunities. The company has the financial capacity to invest tens of billions of dollars in the coming years into developing new renewable energy projects, with an outsized portion of that going toward solar energy.
Those dual growth drivers should provide NextEra with the power to continue generating market-beating total stock returns in the coming years. Steady demand for essential utilities has historically generated relatively stable investment results. The renewable energy sector represents a massive opportunity for investors. However, investors must pick stocks carefully, since not all will capture the full extent of this opportunity.
Two key characteristics to look for are a strong balance sheet and a solar-focused growth profile, since those factors could give a company the power to generate higher returns. Even after a record run this month, it is still a good time to buy the right energy companies. Despite the stock market's recent record high, the global economy is still facing several headwinds. The trading week is winding down -- but the renewable energy deals may be just beginning.
Hydrogen stocks have mostly been bad investments over the past couple of decades. NextEra Energy's pivot to clean hydrogen could point to a profitable future for the industry. Investing Best Accounts. Stock Market Basics. Stock Market. Industries to Invest In. Getting Started. Planning for Retirement. Retired: What Now? Personal Finance. The Ascent. About Us. Who Is the Motley Fool? Fool Podcasts. New Ventures.
Search Search:. Matthew DiLallo. These green energy sources include: Wind Solar Hydro Biomass Geothermal Ocean waves and currents This transition to clean energy will take trillions of dollars and many decades to complete. Image source: Getty Images. How fast is renewable energy growing? How to find good renewable energy investments Renewable energy companies that generate free cash flow and have strong balance sheets have a competitive advantage over financially weaker rivals, since they have greater access to the capital needed to finance growth.
What are the top renewable energy stocks? Here's a closer look at these standouts in the alternative energy sector. A competitive energy segment that generates electricity and transports natural gas under long-term, fixed-fee agreements. Solar energy stocks A compelling renewable energy industry for long-term investors.
Utility stocks Steady demand for essential utilities has historically generated relatively stable investment results. Oil stocks The industry is critical to the global economy, but it's competitive and volatile. The top renewable energy stocks have a bright future The renewable energy sector represents a massive opportunity for investors.
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