Alternative Energy Mutual Funds Investment Outlook

While the GDP is expected to be slightly negative over the next 3 quarters to a year there are reasons to believe alternative energy mutual funds should have significant price appreciation in the near future. Let’s examine why:

New legislation has provided extra funds into the banking industry and the credit markets are beginning to show signs of strengthening. This additional source of capital will provide many alternative energy companies with the funds they will need for expansion.

The industry outlook for alternative energy stocks is considered bullish. One of the world’s largest industrial segments is the electrical power industry. The compounded annual growth rate of the earth’s electrical consumption has grown at a rate over 3.2% from 1980 through 2008, while the global electrical capacity has only increased at a rate of 2.8%. Use of electricity is expected to rise even faster as development in China, Japan and Russia continues to grow. The continuous growth of energy demand has led to an energy shortfall. This energy shortfall is leading to research for new and better ways to produce electricity.

According to the International Energy Agency investment in the production, distribution and transmission to meet this increased demand is expected to exceed $11 Trillion by 2030. This, coupled with the desire for independence from foreign oil, constraints of fossil fuels and environmental concerns is leading to significant interest in alternative and renewable energy sources.

Currently, fossil fuel account for 80% of power generation in the United States. Nuclear power accounts for an additional 9%. Legislation in several states calls for 15% of commercial electrical power to come from renewable sources and many states are expected to follow suit. This will further increase demand for alternative energy.

The increased demand for alternative and renewable energy sources leads to potential profits for many companies involved in the alternative energy industry. The lack of history or benchmarks for these companies makes investing in individual alternative energy stocks to be difficult. This difficulty is avoided by investing in alternative energy mutual funds, also known as green energy mutual funds and renewable energy mutual funds.