As economies around the world recover from the economic impact of the COVID-19 pandemic, the value of stocks are also bound to recover at an equally slow pace. Most of these stocks have dropped in value significantly during the onset of the pandemic and many of these stocks are only just recovering. This means that investors are likely to make a profit by purchasing stocks now, especially when recovery is almost guaranteed.
There are many industries to choose from, and it’s also tempting to stick with the industries that you’re familiar with, but you might be surprised to find that renewable energy stocks might even be considered safe haven assets in the near future. The first question that needs to be answered is why should I consider investing in renewable energy?
Renewable Energy Stocks Offer Significantly Higher Gains
According to a study by the International Energy Agency, renewable energy stocks are currently outperforming fossil fuels in returns. This is evident in the manner in which renewable energy stocks have withstood the impact of the pandemic while oil and gas almost collapsed completely. This shows that renewable energy stocks are significantly less volatile than fossil fuel stocks. The viability of renewable energy stocks is likely to increase even further as more companies recognize and adapt a more eco-friendly stance.
Familiarizing Yourself with Government Policies
Renewable energy stocks are relatively new. This means that government regulations and policies will have a direct impact on the volatility of these stocks depending on the level of support and demand for renewable energy companies.
With enough demand and support, governments are likely to allot more money to the industry and they may even mandate that renewable energy becomes the primary source of energy through a power purchase agreement.
Diversifying Your Portfolio
Even when renewable energy stocks are shaping to be one of the best investment options, it’s always best to spread out your investments across investment types and industries. A good way to diversify your portfolio is by investing in exchange-traded funds. An ETF is a form of a negotiable instrument that is a collection of several securities such as stocks, commodities, and bonds. This collection is what makes it ideal for renewable energy investors because they are going to be exposed to several companies at once.
This is not only an effective measure to mitigate your losses should things fall apart, but it will also ensure that you reap the benefits when the renewable energy industry eventually booms.
Picking Individual Stocks
Once you’ve established a diverse portfolio, you can begin to shift to a more risk, more reward mindset. As with any industry, it’s important to identify which companies have a solid foundation and which companies are most likely to prosper. Seasoned investors are able to identify these companies on their own, but because it’s a relatively new industry, you’re likely going to need the help of forensic economists like the ones from the Knowles Group to help you assess the health of a stock.
Even when there is a general reluctance to shift to renewable energies, there’s no denying that it’s the future of energy. It’s not just because of the increased support the industry has garnered over the years, but also considering how the effects of climate change have manifested over the last few years.