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How do I Choose the Best Alternative Energy Mutual Fund?

Article Details
  • Written By: A. Leverkuhn
  • Edited By: Andrew Jones
  • Last Modified Date: 25 April 2019
  • Copyright Protected:
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    Conjecture Corporation
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An investor who wants to use an alternative energy mutual fund for green investing with a diversified portfolio has a lot of options at his or her disposal. Various mutual funds and mutual fund managers compete for “venture capital” in the form of money from individual investors. Some general tips will help you choose the alternative energy mutual funds that best represent your investing strategy, and that will get you good returns over time.

One issue with alternative energy mutual fund options is to look for “truly green stocks.” A mutual fund might say that its product is “green,” but on a closer inspection, some or all of the stocks might be less relevant to truly sustainable business, clean energy, and environmental concerns than you would like. Look at what’s actually involved in the fund to see if it really represents stocks that you would consider part of the greater alternative energy movement.

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Investors should also look at how alternative energy mutual fund choices provide stability. More volatile mutual funds include more risk, and lots of investors select mutual funds to limit their risk. In addition, you may want to look at how the mutual fund managers provide for easy tracking of assets and yields, as well as providing details like cost basis for tax time (this info is critical when you file your return), and keeping track of complexities such as reinvested dividends. When you look at how firms handle these issues, you can see that these details separate great mutual funds from troublesome ones.

Investors who are getting involved in mutual funds also want to evaluate costs. Mutual fund managers may charge annually for continued investment, or they may levy commissions on their customers. Look for the fund’s Management Expense Ratio (MER) to see what kind of percentage the fund charges annually. Then look at the “loads” or commissions to see what you will pay when you get in or out of the fund.

All of the above will help individual investors set up the alternative energy mutual fund options that work for their budgets and ideologies. Green investing mixes an ideal with an effort toward profit. With good research and “due diligence” on these funds, you can get both in one simple package.

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