Green ETF
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Green ETF invests in companies that are engaged in the research and processing of alternate energy. Since the world population is increasingly favoring and moving towards more environment friendly products and fuels, many new companies have started researching for alternate energy and eco-friendly products. Leading organizations have established new extensions that are dedicated to green products.[br]
Green ETFs are still in the growing stages as lesser companies have invested in alternate energy processing and production. Depending on the size and the objective of the organization, investment in research work varies from being marginal to being exclusively on environment friendly products. These products are popular as the dwindling amount of natural resources makes it necessary to consider alternate sources of energy and less polluting products.
Due to considerable volatility in the market, those who sponsor green ETFs invest in diversified stocks to hedge the investments against losses. Though, there are narrower green ETFs as well that invest their whole funds in dedicated green companies.
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Green ETFs and Green Economics
Green ETFs can be considered as an offshoot of green economics. Green economics states that all economic decisions should be in sync or in some way tied to the ecosystem. It emphasizes on the need to generate quality environment through developments rather than in accumulating material items and wealth.[br]
Advantages of Green ETF
Being funds that are futuristic, they have many advantages such as:
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Green ETFs have shown a growing trend in the number of investors and companies alike. Investors see a huge potential in endorsing green economics especially in developed countries. With increasing demand, the value of green ETFs will increase as well.
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Green ETFs are good for short term traders due to their high volatility.
Disadvantages of Green ETF
Being a new area of investment, green ETFs have few short comings as well:
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Green ETFs usually are narrow. Less diversification makes them prone to volatility. In that context, they are unsuitable for buy and hold strategy.
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Green ETFs have a higher expense ratio. So, even with quick trading, the profits might be smaller.
As per many experts, Green ETFs seem to be the future of ETFs as people are moving from polluting products to more eco-friendly ones.
