The alternative energy space has not been as lucrative as environmentally-conscious investors would like. However, those interested in gaining some exposure to this potentially profitable market can diversify across several companies by buying alternative energy exchange-traded funds. (See also: Alternative Energy ETFs Drop to Key Support.)

The potential for this sector is very large due to growing awareness about global warming and the depletion of oil reserves over time. In addition, with oil prices on the rise again, alternative energy is becoming more attractive to many consumers. This can boost the bottom lines of alternative energy companies.

We selected five alternative energy ETFs based on year-to-date returns. Investors can expect to earn some income, although the total returns on all of these ETFs are negative. All performance figures are current as of August 11, 2017.

1. Guggenheim Solar ETF (TAN)

TAN tracks the Mac Global Solar Energy Index. The fund keeps 90% of its investments in securities from the index.

This ETF is volatile, and the dividend yield is offset by the negative return. However, TAN would be considered a long-term play for investors who want to be in the alternative energy sector when it finally becomes mainstream.

  • Avg. Volume: 235,884
  • Net Assets: $343.64 million
  • Yield: 3.87%
  • YTD Return: 30.60%
  • Expense Ratio (net): 0.71%

2. First Trust Nasdaq Clean Edge Green Energy ETF (QCLN)

QCLN is for investors who want to focus on green energy. This ETF tracks the Nasdaq Clean Edge Green Energy Index.

In addition to investing 90% of its assets in stocks from the index, QCLN weights its investments so that larger companies have a larger weighting. This is known as market-cap weighting. Despite this effort, the money managers place limits on how much money be put into any given stock to avoid over-exposure to large stocks in the index.

  • Avg. Volume: 28,190
  • Net Assets: $77.62 million
  • Yield: 0.76%
  • YTD Return: 23.31%
  • Expense Ratio (net): 0.60%

3. VanEck Vectors Solar Energy ETF (KWT)

KWT duplicates the performance of the MVISa Global Solar Energy Index. This index is comprised of companies that have a minimum of 50% of their assets in solar-power enterprises or that receive 50% of their revenues from solar power. This may include companies that provide equipment to solar power enterprises.

  • Avg. Volume: 1,106
  • Net Assets: $13.04 million
  • Yield: 3.28%
  • YTD Return: 26.45%
  • Expense Ratio (net): 0.65%

4. VanEck Vectors Global Alternative Energy ETF (GEX)

This ETF tracks the Ardour Global Index. The focus here is companies in any area that is considered alternative energy.

The definition of “alternative energy” for this ETF is any company that provides power through environmentally-conscious means. There are small- and mid-cap companies in the portfolio, as well as foreign companies.

  • Avg. Volume: 6,476
  • Net Assets: $83.52 million
  • Yield: 1.77%
  • YTD Return: 19.82%
  • Expense Ratio (net): 0.62%

5. iShares Global Clean Energy Index Fund (ICLN)

The S&P Global Clean Energy Index is the benchmark for this ETF, which maintains a 90% concentration of assets in securities from the index. Up to 10% of assets may be in futures, options and swap contracts.

ICLN also invests in companies that are not part of the underlying index. There is also a focus on liquidity. The fund seeks clean energy companies that trade at volumes that are high enough to make them easier to trade than some smaller alternative energy stocks.

  • Avg. Volume: 47,196
  • Net Assets: $97.19 million
  • Yield: 3.20%
  • YTD Return: 16.56%
  • Expense Ratio (net): 0.48%

Bottom Line

Alternative energy has yet to produce a highly profitable company, but for investors who are willing to be patient and wait for increased consumer acceptance and government endorsement, alternative energy ETFs can be an attractive way to get into the sector. (See also: Going Green With Exchange Traded Funds.)

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