Exchange Traded Funds (ETFs)

Invest in ‘Earth’ with This Sustainable Fund

Congress recently passed the Inflation Reduction Act that includes provisions favorable to the sustainable energy trend.

This only reinforces what has been clear for some time now that the trend toward sustainable energy keeps gaining power. The United States will continue regardless of geopolitical conflicts or economic uncertainty.

Given the recent focus on this sector and its continued popularity among investors, this column is introducing several exchange-traded funds (ETF) in the sustainable energy space. Today is the first of several that I plan to identify in the coming weeks to highlight top ETFs for core exposure.

The Invesco MSCI Sustainable Future ETF (ARCX: ERTH), formerly Invesco Cleantech ETF (PZD), provides an index of global companies that are involved in making the economy more environmentally conscious. Themes present in these companies include alternative energy sources and efficiency, sustainable building projects, agriculture and water practices, as well as pollution management.

Companies to be included in this fund pass an environmental, social and governance (ESG) screen, which some investors view as important, particularly in this sector.

ERTH is down 16.34% in the last year, making its pullback greater than that of the S&P 500. This may make for an attractive entry point. It is also down 4.8% in the last month. Its performance over the long term looks a bit better, ringing up a 11.43% average annual increase over the last five years.

Chart courtesy of www.StockCharts.com

The ETF does offer a small dividend yield of just under 1%, which accounts for its 0.55% expense ratio with room to spare. Assets under management total $368 million, making this fund relatively small.

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However, ERTH holds 265 different companies. These holdings are based in a variety of nations, most prominently the United States (34.25%) and Hong Kong (20.19%).

Top holdings include Tesla Inc. (NASDAQ: TSLA), 5.71%; NIO Inc. ADR (NYSE: NIO), 5.20%; Digital Realty Trust (NYSE: DLR), 4.95%; Vestas Wind Systems (XCSE: VWS), 4.87%; and Enphase Energy (NASDAQ: ENPH), 3.96%.

For investors seeking a way to profit from the trend towards alternative energy sources, Invesco MSCI Sustainable Future ETF offers one possibility.

As always, I am happy to answer any of your questions about ETFs, so do not hesitate to send me an email. You just may see your question answered in a future ETF Talk.

Jim Woods

Jim Woods is a 20-plus-year veteran of the markets with varied experience as a broker, hedge fund trader, financial writer, author and newsletter editor. Jim is the editor of Successful Investing, the Bullseye Stock Trader, and The Deep Woods (formerly the Weekly ETF Report). His books include co-authoring, “Billion Dollar Green: Profit from the Eco Revolution,” and “The Wealth Shield: How to Invest and Protect Your Money from Another Stock Market Crash, Financial Crisis or Global Economic Collapse.” He’s also ghostwritten many books and articles, as well as edited content for some of the investment industry’s biggest luminaries. His articles have appeared on many leading financial websites, including StockInvestor.com, InvestorPlace.com, Main Street Investor, MarketWatch, Street Authority, Human Events and many others. Jim formerly worked with Investor’s Business Daily founder William J. O’Neil, helping to author training courses in the CANSLIM stock-picking methodology. The independent firm TipRanks rates Jim the No. 3 financial blogger in the world (out of more than 6,000). TipRanks calculates that, since 2012, he's made 361 successful recommendations out of 499 total, earning a success rate of 72% and a +15.3% average return per recommendation. He is known in professional and personal circles as “The Renaissance Man,” because his expertise includes such varied fields as composing and performing music; Western horsemanship, combat marksmanship, martial arts, auto racing and bodybuilding. Jim holds a BA in philosophy from the University of California, Los Angeles, and is a former U.S. Army paratrooper. A self-described “radical for capitalism,” he celebrates the virtue of making money from his Southern California horse ranch.