Types of Alternative Energy

• The alternative energy sector can be divided into smaller sectors of companies focused on the different types of alternative energy production. Alternative energy sources include wind energy, solar energy, small hydro energy and biofuels. Also included in the alternative energy sector are companies involved in improving energy efficiency and energy storage -- battery companies. All types of alternative energy are used in different parts of the world and have their own positive and negative aspects.
  
  

Global Sector

• The investment into alternative energy is a global undertaking. An August 2010 white paper from Bloomberg New Energy Finance reported that in 2009, of the new investments in alternative energy, 36 percent was in Europe, 34 percent was in Asia and 17 percent was invested in North America. Many of the leading alternative energy companies and stocks are in Europe and Asia. The stocks of these companies may trade in the U.S. as American Depository Receipts -- ADRs.
  
  

Alternative Energy Funds

• For investors who do not want to do the research into the different individual alternative energy stocks, exchange traded funds -- ETFs -- provide sector-focused investment opportunities. The largest of the broad based alternative energy ETFs are the Powershares Clean Energy Fund, symbol PBW, Van Eck Global Alternative Energy Fund, symbol GEX, and the Powershares Global Clean Energy Portfolio, symbol PBD. Also available are ETFs that hold only stocks of solar or wind power companies.
  
  

Historic Performance

• The relatively short history of alternative energy stocks has been volatile. The Powershares Clean Energy Fund has been in existence for more than 5 years and gives a picture of returns from the renewable energy sector. In 2006, PBW gained 5.23 percent. The next year was a big year for alternative energy and the fund was up 58.35 percent. The commodities and stock market crashes of 2008 resulted in a loss of 70 percent. In 2009, PBW bounced back, gaining 28.94 percent and the fund had lost 10 percent through the first three quarters of 2010.