The pitfalls of investing in green funds
May 7, 2013
Environmentally conscious investors are drawn to what we call socially responsible and green funds because they want put their investing dollars in things that help rather than hurt the environment. They also don't want to throw their dollars at companies that do harm to the planet. Wall Street knows this and has offered up a plethora of socially conscious funds and other securities to capitalize on this sector of investing.
There are a many of these funds available, but you have to be careful which ones you pick.
Many green funds have high sales fees (always ask), are very volatile and do not perform well due to the nature of the industry. Many start-up companies fail, and many new green technologies don't pan out. Alternative energy is still in its growth phase and with this phase comes many a failure.
The US government invested millions in Solyndra in one of the most public government boondoggles to date. After pouring a rumored $528 million or so of taxpayer money into this solar company it went broke, taking down the money with it.
So called green companies can fail at a much higher rate than other companies. Wishful thinking investors and inventors alike may go farther out on a limb than others in their quest to improve the planet. Although the goal is a noble one, with the wishes and dreams also come the realities of cost overruns, failed technologies and the subsequent nightmares of investor losses.
Along with high failure rates, we have no way of knowing if the CEO and VPs of these companies are green themselves. Some could have fleets of gas guzzling SUVs, huge McMansions in the Hamptons and luxurious private jets.
The fees and commissions to buy these securities also are not required to go to green brokers. There is no such requirement on Wall Street on who can collect your money.
Here is another thing to consider when investing green: If you wear a gold ring, have a car or use a variety of other high-tech gadgetry in your life, you have already participated in heavy metal mining, chemical production and oil drilling. It's just impossible in today's world to avoid contributing to some of the worst environmental polluters on the planet.
To help avoid these common problems and issues with green funds, I tell investors to just make your money in the best stocks and securities out there, then if you want to help the planet, donate a few thousand dollars or what you can afford to your local green cause in your town or county.
They'll be glad to get your donation. A few dollars will usually go a long way in a local endeavor, and you will know that your dollars are actually going to good use keeping your neighborhood green and helping your local community or town instead of being sucked into the unknown bowels of Wall Street where who knows what or who your money really supports.
This article expresses the opinions of Marc Cuniberti. Mr. Cuniberti hosts "Money Matters" on KVMR FM 89.5 and 105.1 FM Thursdays at noon. He has been featured on NBC and ABC television and on a host of made for TV documentaries for his economic insights. His website is http://moneymanagementradio.com.
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