Alternative Investment: ETF

Here is an alternative investment that can enhance your wealth and do some environmental good at the same time with a newly launched ETF.

Alternative Investment Explanation

ETF stands for Exchange Traded Fund and this type of investment was launched by the American Stock Exchange about ten years ago. The Amex now lists more than 100 ETFs with over 100 billion in assets.

In simple terms an ETF is a closed end mutual fund that acts like a basket of securities tracking a broad stock or bond market, stock industry sector, or international stock. The ETF gives the benefit of diversification yet provides the simplicity of trading a single stock.

For example of you wanted to invest in a fund that kept pace with the performance of the Dow Industrial Index you could invest in the iShares Dow Industrial Fund. This is a fund managed by iShares management that invests in the shares upon which this Dow index is based. Your one investment would be spread into all these shares. This makes it very easy to diversify into a concept and can provide tax efficiency and lower costs.

ETFs are commonplace as a class, but some ETFs can be a profitable alternative investment.

Alternative Investment Energy Index

An example of an alternative investment ETF is the WilderHill Clean Energy Index ( ECO ) that was launched on the American Stock Exchange.

The index was created by two long time clean energy advocates and consists of 37 top, U.S. clean energy companies.

These companies generally are small cap, pure-play companies. Each company has to have at least a $50 million market cap and must trade at a minimum of $1 per share to be in the index. No fossil fuel, oil, nuclear or coal companies are allowed in the index. The index does not include ‘cleaner’ technologies, like those that reduce the impact of using fossil fuels. It consists of companies that a green energy investor, or those seeking diversification, might want to invest in.

Alternative Investment Diversification

The shares that form this alternative investment index on April 1, 2005 were:

Name Code % of Index

Evergreen Solar ESLR 3.46%

Energy Conv Devices ENER 3.34%

Quantum Fuel Sys Tech QTWW 3.21%

Emcore Corp EMKR 3.15%

Active Power ACPW 3.09%

Distributed Energy Sys DESC 3.06%

N.A. ORA 3.04%

Zoltek Co ZOLT 3.03%

Impco Technologies IMCO 3.01%

Ballard Power Systems BLDP 3.01%

Medis Technologies MDTL 2.98%

Scottish Power Ads SPI 2.96%

Mechanical Technology MKTY 2.93%

Maxwell Technologies MXWL 2.93%

Fuelcell Energy FCEL 2.93%

Ultralife Batteries ULBI 2.91%

Kyocera Corp Adr KYO 2.89%

Plug Power PLUG 2.87%

Hydrogenics Corp HYGS 2.84%

Capstone Turbine CPST 2.81%

Itron Inc ITRI 2.77%

Uqm Technologies UQM 2.70%

Power Integrations POWI 2.60%

Amer Power Conversion APCC 2.57%

Cree Inc CREE 2.52%

Intermagnetics Genl IMGC 2.50%

International Rectifier IRF 2.50%

Amer Superconductor AMSC 2.48%

Echelon Corp ELON 2.47%

Magnetek Inc MAG 2.39%

C&d Technologies CHP 2.26%

Idacorp Inc IDA 2.00%

Central Vt Pub Svc CV 1.96%

Calpine Corp CPN 1.93%

Air Products & Chem APD 1.49%

Praxair Inc PX 1.48%

Boc Group Ads BOX 1.48 %

Mgp Ingredients MGPI 1.47%

Last year this alternative investment index was up 12.98% compared to the S&P500 Index, rising 10.88% and NASDAQ rising 9.16% in the same period.

In March 2005, PowerShares Capital Management LLC introduced an exchange traded fund (ETF) replicating the WilderHill Clean Energy Index, the “PowerShares WilderHill Clean Energy Portfolio” (Amex: PBW).

Shares started trading at $15 and at the beginning of the week were listed at $14.46

Alternative Investment Article

In a article in Red Herring, Bruce Bond, president of PowerShares Capital Management said, “The fund starts to legitimize clean energy as a group. Alternative energy companies are still fairly new to the market, and most are not even categorized as part of the energy industry in the major indexes. The S&P codes, for instance, list the bulk of clean energy companies under ‘industrials,’ he said. Other clean energy companies are categorized as ‘information technology,’ ‘consumer discretionary,’ or ‘consumer staples.’

The index uses modified equal dollar weighting and is composed of companies that are working in six clean energy areas:

(1) Power Delivery and Conservation

(2) Cleaner Utilities

(3) Energy Conversion

(4) Cleaner Fuels

(5) Energy Storage

(6) Renewable Energy Harvesting

Alternative Investment Source

PowerShares Capital Management is passionate about delivering high quality institutional investment management.

This is a new and needed way for investors to tap into a great growth area. I recommend that you earn about this sector and become an expert in this field.


PS. Learn more about alternative investment tacticsat our upcoming International Business and Investing Courses.