I made a small little post a few days ago on Clean Energy Index Funds. This one will focus on Specific Clean Energy ETFs. I hope this post helps people who are interested in this topic.
Before we go in, I'd like to share some potential Megatrends on Clean Energy:
- 50% of the world’s energy is predicted to come from solar and wind by 2050, 7x the percentage in 2015.
- $2T is the total investment needed by 2030 to implement government renewable energy targets.
- Renewables are set to represent ¾ of the $12T the world invests in new power technology through 2040.
The current general thesis for Clean Energy plays heavily with the concepts stated above along with others.
One note to address before we go in is that these funds are non-diversified: when you invest in these funds, you are SOLELY investing in Clean Energy. Do not confuse this with global diversification, these funds are very focused investments and they all have under 100 holdings
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The ETFs
First Trust Global Wind NRG ETF (FAN) - This one has the lowest ER out of three standing at 0.62%. FAN contains about 30 holdings, the top 10 holdings account for about 54.09%. This ETF is very globally diversified, the top 3 countries are Denmark (19.23%), Canada (18.05%), and Spain (14.40%) standing. The US comes in 4th place standing at 10.40% for anyone interested. This ETF tracks the ISE Clean Edge Global Wind Energy Index which is Market-Cap Weighted. The ETFs weighting consists of 66.67% 'Pure-Plays' (companies that provide goods and services exclusively to the wind energy industry) and 40% 'Diversified Category' (companies that are determined to be significant participants in the wind energy industry despite not being exclusive to such industry). Overall, this ETF focuses on the CORE components of Wind Energy.
Fact Sheet: https://www.ftportfolios.com/Common/ContentFileLoader.aspx?ContentGUID=7ed74027-1285-4def-88ac-2ac152007d7b
Invesco Solar ETF (TAN) - This one has the 2nd lowest ER out of the three standing at 0.71%. TAN contains about 27 holdings, the top 10 holdings account for about 63.62%. This ETF is globally diversified, the top 3 countries are The US (57.87%), Hong Kong (14.26%), and China (7.12%) This ETF tracks the MAC Global Solar NRG Index which is Market-Cap Weighted. Similar to FAN, this ETF also weighs itself through the concepts of 'Pure-Plays' (companies that provide goods and services exclusively to the solar energy industry) and 'Diversified Category' (companies that are determined to be significant participants in the solar energy industry despite not being exclusive to such industry), boosting weight for 'Pure-Plays' and underweighting 'Diversified Category.' Overall, this ETF focuses on the CORE components of Solar Energy.
Fact Sheet: https://www.invesco.com/us-rest/contentdetail contentId=025d7c23dbd92610VgnVCM1000006e36b50aRCRD&dnsName=us
Global X Lithium & Battery Tech ETF (LIT) - This one has the highest ER out of the three standing at 0.75%. LIT contains about 43 holdings, the top 10 holdings account for about 59.91%. This ETF is globally diversified, the top 3 countries are, similar to TAN, China (30.94%), The US (24.12%), and Hong Kong (13.22%). A lot of Chinese weight, please research this carefully. China is still considered an Emerging Market so this is a very unique weighting situation. Anyways, this ETF tracks the Solactive Global Lithium Index which is Market-Cap Weighted. This ETF is unique because it focuses on the Full Lithium Cycle which means it offers exposure to the Metal/Mining, Lithium Refining, and Battery Production Segments. This ETF is similar in some ways to Commodity Metal ETFs, keep this in mind if you plan on going further with this.
Fact Sheet: https://www.globalxetfs.com/content/files/LIT-factsheet.pdf (This Fact Sheet is 3 months old, it's outdated. Seek out a website such as ETF.Com for up to date information)
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What I provided is very brief. If you're serious about Clean Energy, you must read each ETFs fact sheet along with the prospectuses. This will educate you on the field more and provide more crucial data for each fund.
The main difference between each of these ETFs really comes down to the underlying holdings, sector allocations, and global diversification. Analyze your Risk Tolerance and Circle Of Competence in terms of holding/sector/globality for each fund before making a decision.
Disclaimer: I am NOT a financial expert. You MUST do your own diligence -- this is ONLY for educational purposes.
- Naitor295
Submitted October 25, 2020 at 09:16PM by Naitor295 https://ift.tt/3mq8u2b
