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Tickers in this Article: GEX, PBW, QCLN
As the pre-election hype heats up in the United States, the debate over global warming and oil dependency becomes more of a mainstream topic. Candidates want appear as "green-messiahs", come to lower the greenhouse gases and introduce alternative energy technology.

Global Issue
The United States is not the only country that is having issues with energy dependence. The reality is global warming and a dwindling supply of fuels are worldwide issue. Even though the United States is the leader in many aspects of technology, it is behind many European countries when it comes to alternative energy. America derives a minimal amount of its energy from alternative sources compared to a country such as Germany, which is big on solar power.

A global push toward alternative energy options is inevitable. There are companies working on technologies that include solar power, wind power, fuel cells, hydrogen power and many others. As investors, it is difficult to determine which technology will be the winner. Harder still is determining which specific company will provide it. (To learn more, see Taking Global Macro Trends To The Bank.)

Diversify With ETFs
This is where exchange-traded funds become an investor's best friend. An alternative-energy ETF offers a basket of stocks in one investment, lowering the investor's research time, fees and overall risk. There are currently four ETFs that consider themselves alternative energy options for investors.

The newest ETF in the group is Market Vectors Global Alternative ETF (NYSE: GEX), which began trading in May. To differentiate itself from the others in the group, GEX invests in stocks that are listed outside of the United States. With only 42% of the assets invested in the United States, GEX is truly a global ETF.

My view on the world economy is that the growth opportunities available over the next few years lie outside American borders. By investing over half of its assets in Europe and Asia, GEX offers investors increased growth potential and global diversification at the same time. As I mentioned earlier, the America is not the leader when it comes to alternative-energy technology.

The top five holdings of GEX are all foreign, wind-power and solar-power companies based in Europe. There are a total of 30 companies in the ETF and all have a market cap of at least $100 million. To keep with the theme of the ETF, all companies included must derive at least 50% of their revenue from alternative energy technology.

Not only is GEX the first alternative energy ETF to go global, but it also has a bigger exposure to large-cap stocks. Most companies in the sector aren't far from "startup status" and rely on one technology to make them the next "big thing". This is not the case with GEX because 31% of its assets are invested in large-cap stocks. The global exposure allows for large-cap companies based in Europe to be included in the makeup of GEX. Not only does this give investors exposure to all asset classes, it also lowers the risk of investing primarily in small-cap, emerging companies.

Competition
A direct competitor of GEX and the first alternative energy ETF to hit the market was the PowerShares Wilderhill Clean Energy Portfolio ETF (AMEX: PBW). Its makeup is completely different than GEX's because PBW is composed of only U.S.-listed stocks and has less than 10% in the large-cap asset class. I was an owner of PBW in 2005 and 2006 when big money was working its way into the sector. However, in mid-2006 the ETF hit a high, along with the entire sector, and closed out the year lagging the overall market.

The other direct competition for GEX is the First Trust Clean Edge ETF (Nasdaq: QCLN). Again similar to PBW, the ETF is composed of only U.S.-listed stocks and has the majority of its assets in the small-cap and mid-cap classes. The ETF has only traded on the Nasdaq since February; therefore, it is difficult to compare performance with PBW.


Best of Breed
In the end, the likelihood of the alternative energy craze turning into a long-term trend is great. However, nobody knows which sector and stocks will come out the big winner. If you do not want to take the risk of individual stocks, but would like exposure to the entire global sector, GEX is your ticket.

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