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The Top Alternative Energy Mutual Funds – 4 Tips on How to Evaluate Them – Part 2

3 – Sector Allocation

Investors should look for a low allocation to solar stocks and a high allocation to stocks related to energy efficiency. Hydro, geothermal, the electic grid and alternative transport are considered to be good sectors and the best performing mutual funds probably have these sectors in their portfolios. They most often than not, however, make up a small percentage of mutual fund portfolios. Some green funds have an allocation to “other,” and this should be as small as possible, as this represents compaines that have operations that are not clean green energy related.

4 – Value

Renewable energy is a growth sector, as it is fairly new and building up from a small base. This however does not mean that green energy has no value stocks. In the market as a whole, over the long term value stocks have regularly beaten growth stocks, and I am sure that this will continue. Mutual funds that emphasize value stocks are therefore preferred.

Of-course, no one mutual fund will ever be objectively the best in terms of all of the above factors. Your choice all comes down to priorities. What is most important to you – purely the cost? (in which case you should then be looking at the ETF option), or is it the balance of allocation and diversification? Determine your priorities, and then you will be in the best position to find the mutual fund which is best for you.

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The information supplied in this article is not to be considered as medical advice and is for educational purposes only.