Investors who believe the green fuel technology sector of the market will perform better than the stock market as a whole have a number of ways to profit from that belief. If you feel that green technologies are poised for explosive growth over the next several years, you can seek out companies and funds that invest heavily in those technologies. As with any investment, it is best not to put all your money into the same sector--but putting part of your stock market portfolio in green power can make a lot of sense.
Instructions
Individual Stocks
1. Contact the fuel companies you deal with on a regular basis, such as your local utilities company, and ask for the investor relations department. Ask the representative who answers the phone about investments the company is making in green fuel technologies. A number of traditional energy companies are investing in alternative fuels and alternative sources of energy.
2. Read financial publications such as "The Wall Street Journal," "Barrons," and "Investors Business Daily." Look for articles about the alternative fuel market, and note the companies mentioned in those articles. Make a list of the companies you are interested in, then follow up with each company to obtain an annual report. Review the annual reports carefully to determine how profitable each company is-- and how fast its earnings are growing. Compare the earnings per share for the current year with the last several years to get a feel for how rapidly each company is growing and expanding.
3. Open a brokerage account if you do not already have one. Since you will be choosing your own stocks, you can save money by using an online discount broker instead of a traditional one. Log onto your brokerage account, go to the trading menu, and enter the ticker symbols of the stocks you wish to buy, along with the number of shares you want to purchase. Check the details of the transaction, verify that you have enough money on your account to make the trade, then send in your order for processing.
4. Print a copy of your trade confirmation and keep it with your tax records. It is important to know how much you have paid for each green fuel stock since that will allow you to determine the cost basis and compute your capital gain when you sell your shares.
Mutual Funds
5. Contact several low-cost mutual fund companies and request prospectuses for their green energy and green fuel technology funds. Most major fund families, including major players such as Vanguard and TIAA-CREF, have several different funds from which to choose.
6. Review each prospectus carefully, particularly the sections dealing with expenses and performance. Look for funds that have consistently performed better than their respective indexes. Also look for funds that charge low expenses since high expenses can eat into your investment return over time.
7. Complete the application for the mutual funds you want to invest in. Provide all the information requested, including your name, address, and Social Security number. Some funds might also request information about your income level and occupation.
8. Submit the completed form, along with your initial deposit, to the address on the application. Check the address carefully since some mutual fund companies use a separate address for overnight mail.
9. Keep copies of all your purchase confirmations with your tax records. You will need this information to compute your capital gain and average cost basis when you sell your shares.
