donzelion

Using ETFs to Invest in Alternative Energy

In general, I'd expect alternative energy ETFs to outperform alternative energy mutual funds - as you say, lower fees are better. However, I don't expect great performance from alt-energy ETFs either, because:
(1) Alt-energy specialty funds have relatively high fees among ETFs
(2) Properly weighing the "green-ness" of each equity requires subjective judgments (e.g., GE and BP make more "alt-energy" products than a substantial number of green energy equities)
(3) Over time, alt-energy companies with products offering long-term growth opportunities will merge, buy, or be bought out by mainstream companies (making problem #2 worse over time)
(4) "Faux Green Companies" can game the system (get yourself classified as "green," and who will question it, or audit the classification before adding someone to the index? who becomes the gatekeeper?)

Hence, I prefer a "core and explore" approach: 90% of my investments go into traditional instruments (cash, bonds, and basic, low low fee ETFs), and the remainder goes into long-term investments in promising companies.