Green Stocks: Invest Wisely
So-called "green" stocks, or stocks of companies involved in sustainable industries, are all the rage these days. And for good reason. Few industries appear to have the potential for garnering big returns going forward that the green industry does. While it might be tempting to jump into one of the many publicly held companies currently involved in the manufacture and deployment of such products as
solar panels,
wind turbines, or
batteries for electric cars - caution is paramount. If you are thinking about purchasing shares in companies that are either partially or completely involved in green technology, check out the tips on this page, and then visit the links below.
- If it sounds to good to be true, it is. Once upon a time, the saying used to be: "if it sounds to good to be true, it probably is".
Well, forget the "probably". Where there is the potential for a "mania" - as there currently is with green technology - there is the potential for scams and fraud. If someone claims that they know a friend of their aunt's parrot who invested in Solar Bark, Inc., and then made an 800% return on the company's technology which uses solar power to change tree bark into gasoline - then run. Even established companies with solid track records for bringing green tech to market can have their struggles in the marketplace, just like any other company. Pie-in-the-sky investment returns from fledgling companies with promising products should be viewed with extreme skepticism, especially those companies involved in sustainable industries.
- Should you invest in "over-the-counter" (OTC) stocks? The OTC (also known as the "pink sheets",
or "penny stock") market has been home to many questionable investment avenues for a long, long time. So much so that many worthy investment advisors do not invest in, or advise against investing in, those companies that are listed as OTC stocks. Many experienced investors believe that only those stocks listed on the major exchanges, such as the NYSE or NASDAQ markets, bear consideration. This writer agrees. While the very slim potential to make big money in the OTC world certainly exists, so does the potential for winning the lottery. You get my drift. You'll have a much better chance of getting caught up in a "pump and dump" scam via the OTC market than you will of finding the next Apple, Google, or Microsoft. Not only that, but many companies that wind up OTC were once listed on the bigger exchanges - and then got kicked down to the OTC world due to financial mismanagement, questionable activities, or are simply on financial life-support. They may be about to file for bankruptcy or are currently in it. So beware the green "penny stock".
- Beware the next bubble. It might sound odd that a "green" site such as
EcoSwap.net would warn of the pitfalls of investing solely in green tech.
However, it does the average investor no good to jump into what could be the
next investing bubble without a little diligence. The U.S. (and the rest of the
world) has already seen the dot-com and real estate booms and busts. Could green
tech be next? Perhaps. At any rate, there are worthwhile companies to
investigate in the sustainable industry - as well as a number of "also rans".
There are also potential problems that may arise for the individual investor that gets caught up in a "bubble mentality", should green tech go the way of the internet stocks or real estate flippers of the last decade.
Proceed with caution - and hedge your bets.
- Diversify. Well, of course. This is the foundation of solid investing advice, isn't it? However, you have undoubtedly read about those sad souls who put their entire life savings into Enron stock, or turned over significant chunks of change to a certain Mr. Madoff. Whether you invest in baseball cards, gold bullion, tulip bulbs, Chia pet inventory or - yes - green stocks; invest only a percentage (it's up to you, the individual investor, to decide
what that percentage should be) of your assets in any one asset class.
- Been burned before? Try again. Investing, like relationships, can hurt. That doesn't mean you should become a monk and hate everyone who has found their "one-and-only's" when you haven't yet, or avoid the stock market because you lost your shirt on Amalgamated Solar Widgets, Inc. So you lost your heart to Barbie Lou Twinklenose or Chip Thunderhero; do you then avoid all members of the opposite sex, forever after? (You're answer should be: NO.) Take the same approach with investing. Learn from your mistakes, don't put all your eggs in one financial basket, do some research, maybe read a book or two - and dive back in. Money can be lost in the stock market - but far
more money can be made in it.
- Go overseas, young man (or woman). European countries, China, and even developing nations such as India and Brazil are leading the way in both the manufacture and deployment of green tech products. This means that major investing opportunities within the world of green tech (as with other industries) lie outside of the U.S. Does this mean that America isn't, or won't be, a leader in sustainable industries? Of course not. But the prudent investor looks worldwide for smart investing avenues, and acts on them. Don't focus only on what lies within the North American continent (and don't dismiss it, either). The pursuit of a cleaner future powered by alternative energy sources is a global pursuit.
Green Investing Resources and Links
- The Motley Fool. A plethora of advice, wisdom, tips, and strategies for the individual investor that prefers to pick his or her own stocks and mutual funds. The Motley Fool is one of the oldest and most information-packed investing websites around.
- Morningstar. While the Morningstar site offers a premium, or paid, version of it's famous portfolio-monitoring tools, the free version may be all the average individual investor will ever need. The criteria that you can view for each stock you either hold or are considering to buy is vast and, frankly, almost overwhelming.
- EDGAR. The EDGAR site is the Securities & Exchange Commission's website devoted to the keeping and distribution of financial records for publicly held companies. Before investing in that hot penny stock tip (because you're going to do it anyway, even after reading this post, aren't you?) check up on the financial statements of the company in question. Visit the Motley Fool site (above)
for pointers on how to read balance sheets and 10Q reports.
- Individual Company Websites. Read up on the company you wish to invest in. Study the projects that it is involved with, who it's principals are, and whether or not the company is a market leader.
Is it about to deploy a new technology, or simply pushing out copies of someone else's design? Check how often you see a manufacturer's logo on a dealer website - more often: good; less often - well, maybe it's an undiscovered gem.
- The Investing Revolution.
Jim Whiddon of Texas seems to have the most level-headed takes on markets and investing that I have heard to date.
He's a critic of
Jim Cramer (a grade-A douchebag, who, for some reason, still is held up as some sort of investing genius. Please.) That alone gives
Whiddon status in my eyes. Investing Revolution podcasts are worthwhile.
When all is said and done, the same principles that apply to investing in anything apply to investing in green companies. However, as the world flees from real estate investments and still continues to lick its wounds over failed dot-com disasters, be prepared for a potential flight to the green sector. The future is bright - but use suncreen!