Best No-Load Alternative Energy Mutual Funds, Part2 - GAAEX

Today we'll continue our look at the best no-load alternative energy mutual funds and ETFs with an analysis of the Guinness Atkinson Alternative Energy Fund (GAAEX).

The Guinness Atkinson Alternative Energy Fund seeks long-term capital appreciation by investing in equities of businesses that are involved in alternative energy or energy technology sectors. They believe that a growing demand for energy, limited power production capacities, rising energy costs and environmental awareness are going to lead to profits for these businesses and the alternative energy mutual funds that invest in them.

The Guinness Atkinson Alternative Energy Fund provides investors with the opportunity to take part in the shift toward alternative and renewable energy sources. Typically, the fund invests 40 to 60 stocks of companies that receive more than half their revenues from alternative energy or alternative energy technology.

Alternative energy typically includes power created through solar, hydroelectric, wind, biomass, biofuels, geothermal and tidal waves. Alternative energy technology includes the technologies that allow us to tap into alternative energy sources whether through storage and transportation, and technologies that can enable us to conserve energy or allow more efficient use of energy.

The Guinness Atkinson Alternative Energy Fund invests in securities of foreign countries and may have additional risk and volatility due to political, economic and currency risks and differences in accounting methods. The Guinness Atkinson Alternative Energy Fund is a non-diversified fund. This means that the funds assets are concentrated in relatively few companies which will increase both the opportunity for gain and the risk of loss.

The Guinness Atkinson Alternative Energy Fund invests a significant percentage of its assets in Solar (46.8%), Wind (28.45$) and Hydro (9.48) sources. Its top ten holdings as of 12/31/2008 are SMA Solar Technology Ag (4.34%), JA Solar Holdings Co. Ltd (4.06%), Q-Cells AG (3.94%), Solarworld AG (3.9%), Echelon Corporation (3.81%), SunPower Corporation (3.75%), Iderdola Renovables (3.67%), Vestas Wind systems A/S (3.66%), Suntech Power Holdings Co. Ltd. (3.66%), First Solar, Inc. (3.50%).

Due to the funds lack of diversification and propensity for investing in small companies the fund has recently seen greater losses than the market as a whole. This is to be expected. I would further expect the fund to achieve greater gains during upswings.

The funds expense ratio is a relatively low 1.69%, and there is no sales fee. As the economy recovers, this may become one of the highest returning alternative energy mutual funds available on the market.

We will continue our analysis of the best no-load alternative energy mutual funds with Invesco Powershares Global Clean Energy Portfolio (PBD).

Green Mutual Funds/Alternative Energy Mutual Funds and Socially Responsible Investing

Green mutual funds and alternative energy mutual funds both fall under the category of socially responsible investing (SRI). Socially responsible investing is known for trying to maximize the "social good" as well as the investments financial return. SRI achieves it's goals through investing in companies that display a social consciousness and ethical business practices that try to make the world a better place. Generally, the socially responsible investor shows favoritism towards companies that provide consumer protection, human rights, social welfare or a cleaner/healthier environment. A recurring theme of socially responsible investments is that you can "do well by doing good."

Green Mutual Funds, or green funds, are environmentally friendly mutual funds offered by investment companies such as Calvert and Winslow, invest in companies that operate in a environmentally responsible manner. The companies that green mutual funds invest in usually do their best to ensure that their day to day operations have as little negative effect on the environment and produce as little pollution as possible. Many of these companies also provide products and services that are aimed at making the world a cleaner, greener place.

Alternative Energy Mutual Funds, also known as renewable energy funds, invest in companies that are working to provide power from clean, renewable energy sources such as wind and solar power. Typically, the companies that alternative energy mutual funds invest in help provide electricity at reduced costs and help us move away from our dependence on fossil fuels, reducing pollution in the process.

As the world's demand for energy increases and we all become more environmentally aware the companies that alternative energy mutual funds are expected to become more and more profitable, leading to a strongly positive long term outlook for most alternative energy mutual funds.

If you are looking for areas to invest your money while still maintaining a positive environmental outlook you should strongly consider investing in green mutual funds and alternative energy mutual funds. Green Mutual Funds and Alternative Energy Mutual Funds are great ways for you to earn a little green while keeping the earth green.

Environmentally Friendly Mutual Funds

Many people have asked me if there are any environmentally friendly mutual funds on the market. The answer is a resounding YES! We keep stressing the point that you can earn handsome profits from investing in companies that are environmentally friendly, whether through their business practices or through the products and services that they sell.

For many people, finding individual companies to invest in can be quite difficult. Everyone knows that diversification is very important to reduce the amount of risk that your investment portfolio incurs. Because of limited funds and lack of information most investors will find it difficult to find stocks to buy that will be profitable and provide enough diversification. Environmentally friendly mutual funds do this work for you. The search for businesses that are expected to be profitable, conduct their business in ways that limits the negative effects on the Earth and may even produce products or services that help make the world a cleaner place.

Environmentally friendly mutual funds are normally classified in the investment subsection called green mutual funds. There are many different environmentally friendly mutual funds available that would be considered green mutual funds.

Mutual Funds: What Are Loads?

Mutual funds are broadly categorized as load funds and no-load funds. Basically, a load is the sales charge associated with buying the mutual fund. Typically, when you buy a mutual fund through a financial planner or broker you will pay a load, which is pocketed by the salesperson or another middleman.

Historically, there has been no significant difference in returns for load and no-load funds. When the load fees are factored into the mutual funds returns the no-load funds have a higher return. This is simply logical if you think about it. If two funds have the same return (as load and no-load mutual funds do) and you have to pay a sales commision on one (the load fund) than the other (the no-load mutual fund) will earn you more in the long run. As an example, if you invest $100 into two funds and each pays you a $10 return you've earned 10%. If one of them charges you $1 when you withdraw you earnings it's real return is only 9%. 10% is better than 9%, no-loan mutual funds are better than load mutual funds.

The most basic type of load is a front-end load mutual fund. With a front-end load mutual fund you pay a portion of your initial investment to buy the fund. Usually front-end load mutual funds charge 3-9% for the priveledge to buy the fund. One a $1,000 investment you lose $30 to $90 before you even own shares. Nice.

Invstors began to realize that paying front-end loads greatly diminished the amount of their investment. Mutual fund companies responded with Back-end loads pay the same 3-9% sales commision, but you only pay when you withdraw the money. Now, if the value of the investment goes up you pay more than you would with a similar front-end load. If the value of the investment goes down you still pay the fees and lose even more of your initial investment.

Even better than back-end loans are contingent deferred sales loads. Basically this is a back-end load mutual fund that says that every year you own the fund your load amount goes down by 1%. Now, this sounds like a good idea if you are planning on holding the fund as a long term investment. Salesmen will often market these saying that you don't have to pay any load, however, every year your account is charge with a 12b-1 marketing fee of about 1%. So, you pay 1% every year you own the fund. For example, a mutual fund has a 5% back-end load that diminishes by 1% annually. You hold the fund for two years. You've paid 2% in 12b-1 fees and now have a 3% back-end load left to pay. Still sounds like 5%, doesn't it? This gets even better if you hold the fund longer than 5 years. You pay that 1% per year regardless of how long you hold it. Really makes you want to be a long term investor, right?

The answer is to look for "no-load" mutual funds. They simply don't charge a load, saving you money and increasing your earnings in the long run.