In part three of this three-part series, writer Cesar Zambrano suggests how to get started investing in Green technology. Please note that these articles do not constitute specific investment advice and are merely the opinion of the author. If you have investment questions, please speak with a licensed investment counselor. — Julia Wasson, Publisher
In my last two posts, I wrote about how attractive stocks in the Green sector have become for investors and how to prevent investment fraud from spoiling a Greentech investing experience. Now it’s time to discuss an investment strategy and where to invest precious capital.
Perhaps we can learn from one of the world’s richest men and most renowned investors. Warren Buffett once wrote that to invest successfully over a lifetime does not require a stratospheric IQ, unusual business insights, or inside information. What is needed is a sound intellectual framework for making decisions and the ability to keep emotions from corroding that framework. Our goal now is to design our own “intellectual framework.”
First, assuming we’re novices in this arena, let’s agree that capital retention is paramount. We are not prepared to lose everything by taking unusually high risks. This objective eliminates private placements, highly speculative ventures, and stocks valued below $5 from consideration. Diversity and liquidity are also necessary objectives. We do not want all of our eggs in one basket, and when we want to sell, we do not want a thinly traded stock that has few buyers to stabilize market prices.
Safety is the rule at this point, but did we leave any options open? Yes, we have, and the stock market has us in mind. The best options were created in the past decade for investors like us. They are called Exchange-Traded Funds, or ETFs for short, and a definition provided by investopedia.com follows:
What Does Exchange-Traded Fund – ETF Mean?
A security that tracks an index, a commodity or a basket of assets like an index fund, but trades like a stock on an exchange. ETFs experience price changes throughout the day as they are bought and sold….
Because it trades like a stock, an ETF does not have its net asset value (NAV) calculated every day like a mutual fund does.
By owning an ETF, you get the diversification of an index fund as well as the ability to sell short, buy on margin and purchase as little as one share. Another advantage is that the expense ratios for most ETFs are lower than those of the average mutual fund. When buying and selling ETFs, you have to pay the same commission to your broker that you’d pay on any regular order.
These funds give you strong exposure and diversification within their specific clean energy sectors. You can also spread your investment between different funds. As you become familiar with this type of investing, you can always review the actual company holdings and weightings for each fund. If you are inclined to invest in a specific entity, you would now have a sound basis for making that decision.
The main point is to be safe and have fun with your investment experience. Successful investing is tied to knowledge, experience, and controlling one’s emotions. The last part comes when disciplined decision making is the rule. Warren Buffett followed these simple rules. Now it is your turn to do the same and “Go Green.”
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Cesar Zambrano is a writer for ForexFraud.com.