Minimizing Risk in the Renewable Energy Market
Photo: Butch Martin/Getty Images
There's little doubt that the basic fundamentals of supply and demand will dictate the long-term success of the renewable energy market.
As energy demand increases, and fossil fuel supplies decrease, it will be renewables that fill the void. And no amount of doublespeak, misinformation or market manipulation can change that.
However, this doesn't mean that the renewable energy industry is immune to market volatility. We're now seeing proof of that as eight years of failed economic policies and irresponsible borrowing and lending practices have wreaked havoc on Wall Street. Though it's ultimately the individual investor that gets hit the hardest. And that's unfortunate. Especially for renewable energy investors who are trying to invest responsibly. Because during this time of economic uncertainty, we're seeing a lot of quality renewable energy stocks struggle against the backdrop of an economic downturn.Of course, it won't last forever. But in the meantime, how can investors remain loyal to the renewable energy market without taking on a boatload of risk?
One way we suggest is through green income funds
A Safer Shade of Green
Income funds are basically mutual funds that provide income through dividend payments. They tend to be very conservative investments, and often work quite well for those looking for a steady flow of cash, but without taking on too much risk.
And yes, there are some income funds that definitely lean to the green side. Though please note that I write "lean to the green side" because some of the holdings in these income funds cannot be considered 100 percent sustainable. But if this issue doesn't concern you (i.e.- you'd still consider an income fund that maintains a larger percentage of renewables, as opposed to one heavily weighted in fossil fuels), then you may want to take a look at Algonquin Power (TSX:APF-UN) and Innergex Power (TSX:IEF-UN).
Algonquin Power maintains a portfolio that includes:
• 47 hydroelectric facilities
• 5 natural gas-fired cogeneration facilities
• 1 wind energy facility
• 7 alternative fuels facilities
• 17 waste-water facilities
In 2007, Algonquin's annual distribution was $0.9192 per unit.
Innergex Power has a portfolio that includes:
• 10 hydroelectric facilities
• 2 wind farms
In 2007, Innergex's distribution was $0.9648 per unit.
A Bit of Stability
At a time when no one can be certain as to how long this market volatility will last, green income funds can definitely provide investors with a bit of stability.
Of course, the safest way to avoid market volatility is to stay out of the market altogether. But eventually, hostile market conditions will subside. And when they do, the renewable energy sector will certainly shine.
Because as the oil, coal, natural gas and uranium continue to disappear at an alarming rate, the world will be forced to turn to the only real solution. And that's renewable energy.
To a new way of life, and a new generation of wealth
Note: TreeHugger does not endorse any business in this post and is not in the business of providing financial advice. Any potential investor acting on any advice provided in this post does so at their own risk. TreeHugger advises potential investors reading this post to always seek financial advice from a financial advisor before investing. No information provided in this post should be considered an inducement to invest.