The stock market offers a plethora of investment opportunities for traders to increase their personal wealth. A lot of these can involve buying shares in and backing a company that may not meet with your ethical beliefs but will lead to a profit. For those who this is a real concern, consider investing in some of the many renewable energy companies available.
The global energy market is valued at over $7 trillion, and given that we all need many sorts of energy to live our daily lives, it’s not something that risks disappearing. With Tesla’s recent solar panel roof unveiling and the further development of electronic cars, 2017 looks like an interesting year for renewable energies. Here we present a brief guide to investing in renewable energy companies.
Reasons to Invest in Renewable Energy
There are many reasons to invest in renewable energy, whether it’s something you are passionate about or just want to make the most of its increasing value. For example, the wind tower market is expected to breach $19 billion by 2019, offering a great chance to boost your profits while doing the environment some good.
The demand for energy is forecast to grow faster than actual consumption, and with more individuals and companies seeking ethical, clean options, renewable energy offers a good projected investment. There are options to diversify investments, across solar, wind and other sectors, plus there are a range of new and established stocks to back.
How to Invest in Energy
S&P 500 Energy index is a good place to begin your search for energy companies to invest in. This not only provides the performance of the sector, but individual stocks’ that can be broken down and analysed to find the best ones that suit your needs.
There are various ways to invest in renewable energy. From ETFs and futures, to CFDs and share trading, or spread betting on the market, depending on your trading strategy, choose the best method for you. Those unsure about how much and the best way to invest based on their circumstances will be best speaking to a financial advisor beforehand.
What to Look for in Stock Selection
You may want to back a brand new solar power company, or put some money behind a successful hydro-electric power business. In order to pick out one that is ethical and profitable, there are a few things to check out.
The energy market is highly volatile, with it experiencing great highs and lows over the past few decades. Historically, cheaper energy stocks have provided the best value, given the best chance to grow and provide a great return on the initial investment.
Historical value should always be inspected, specifically the last 12 months. Those with strong positive earnings growth are usually the best performing ones. Taking a chance on new, relatively slow performing energy companies offers the opportunity to diversify, and they can often be worth high value due to the cheaper cost.
There’s more to finding good renewable energy firms to invest in than just stock price and price-to-earnings ratio. Return on the invested capital is a good way to work out the quality of stocks available, and differentiating between them, but other factors come into play too.
Do a little research and see if you can find out more about the company and its finances. Those with low debt and a good financial history, with a great business plan will be more attractive. Then there’s the products or services they offer, the higher quality ones should perform better in the future.
For a renewable energy company to deliver great returns on your investment it will need to pack plenty of potential. This involves a fair amount of financial analysis or simply looking into the company and believing in its potential. There is a lot of risk involved, but a new, innovative idea could be a success and lead to great financial returns as well as having appositive environmental impact.
Renewable Energy Opportunities
As with investing in any stocks, there is a lot of risk involved that you need to be aware of. The main way to prevent against losing out is to diversify your investments across a range of renewable energy stocks and shares, and set up a trading plan with risk reduction measures.
Renewable energy is on the rise and there are sure to be many more fresh opportunities popping up on the stock market in the coming years. Don’t just opt for the first one you see, conduct plenty of financial and ethical research before investing in renewable energy companies.