Are there renewable-energy stock funds?
The Answer Guy comes up with two options - and one big risk. Plus: How to judge target-retirement funds.
(MONEY Magazine) -- Question: Is there a pure-play energy fund that invests only in renewable-energy stocks like solar, wind, hydroelectric and biofuels? I usually prefer the low cost structure of index funds. - Jim Campbell, Ortonville, Mich.
Answer The good news: You have two choices. The bad news: They're expensive and risky. So go in with your eyes open.
The ETF's expense ratio of 0.71% is high for that type of investment, and the mutual fund's 1.98% is no bargain either. While neither fund invests in, say, ExxonMobil (Charts), they are not 100% green. The Clean Energy fund's biggest holding is Cypress Semiconductor, which gets about 20% of its sales from solar-energy products.
The risk: You're going to own a lot of small stocks in a cutting-edge field where failure will be common. As Internet stock funds taught us a few years ago, you can correctly predict that an industry is poised for explosive growth - and still get burned in the market.
Question: Whose target-date retirement fund for 2035 - T. Rowe Price's, Fidelity's or Vanguard's - would have produced the best results if I had invested in it a year ago? Can I find out from price-history charts online? - Jim Morgan, Renton, Wash.
Answer: No, you can't compare one-year mutual fund returns using those charts. But that's not necessarily a bad thing.
Price charts don't track funds' dividends and capital-gains distributions, so they don't indicate how much you would amass if you reinvested those payouts as most people do.
For that you need total-return stats, which show that a $10,000 investment in T. Rowe Price's 2035 fund would have grown to $11,071 in a recent 12-month period - beating Fidelity's offering by $121 and Vanguard's by $195.
So T. Rowe wins? Not really.
One-year performance is a lousy yardstick, especially for target-retirement funds, which are funds of funds designed to be a one-stop solution for retirement near a specified date perhaps decades away. When Money Magazine has examined target-date funds, we've looked not only for low expense ratios - key to any fund's performance - but also for an age-appropriate mix of stocks and bonds, a prudent dose of global investments and a first-rate group of funds in the portfolio.
That led us to include both the Vanguard and T. Rowe Price target-retirement lineups in the Money 65, our list of recommended funds.
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