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Put Your Money Where the Green Is


By Carleen Hawn
Outside Magazine
November 2006


Financial advice in the pages of Outside? It's a departure, sure, but it
doesn't take a genius to see which way the money's blowing. In the pages
that follow, we'll introduce you to a guru of green investing and lead you
through a savvy, three-step plan for getting in the game yourself. Because
in a world of high gas prices and climate change, cashing in on clean
technology and eco-friendly businesses is good for the planet—and even
better for your portfolio.

Get in the Game: Mutual Funds

If the thought of directing your own individual stock trades is
intimidating, experts suggest you start out by buying shares in a mutual
fund, a pool of money collected from a group of investors and managed by a
financial expert. Following a fund-specific set of investment criteria,
the expert, or fund manager, uses the cash to invest in a range of stocks,
bonds, or other assets. "With a mutual fund, you get automatic
diversity—you're able to acquire stakes in numerous companies at once,"
says Matthew Patsky, a portfolio manager at the Boston-based Winslow Green
Growth Fund. While stockbrokers charge just about every time you buy or
sell shares, mutual-fund companies collect one annual fee that covers all
fund-operating expenses. Called an expense ratio, the fee is a percentage
of your average net holdings for the year. The funds featured here invest
in companies that practice sustainability or carbon neutrality or focus on
developing alternative-energy technologies. Most have consistently
outperformed the S&P 500 Index average over the past five years.

Talk the Talk

A company's market capitalization is determined by multiplying
current share price by the firm's total number of shares
outstanding. Those with market caps of $10 billion or more are
broadly described as Large Caps and tend to include firms from
established industries that generate big revenues. Small Caps have
market caps of less than $1 billion and tend to be younger companies
with more volatile businesses—and therefore more volatile stocks
(read: tech stocks). Generally, small-cap stocks are thought to bear
greater risk, but that can also mean greater opportunity for reward.
Mid-cap companies fall somewhere in between.

SMART PICKS: MUTUAL FUNDS

1. Calvert Large Cap Growth Fund (clgax) Focus: Eco-savvy large-caps ($10
billion and up) Typical stock: Goldman Sachs, which promotes mandatory
pollution reductions Five-year average annual return: 4.88% Minimum
initial investment: $2,000 Expense ratio: 1.56%, with a one-time upfront
fee of 4.75% of initial investment Net assets: $1.15 billion. calvert.com

2. New Alternatives Fund (NALFX) Focus: Foreign and domestic
alternative-energy companies Typical stock: German solar-panel maker
Conenergy Five-year return: 5.75% Minimum initial investment: $2,500
Expense ratio: 1.17% Net assets: $95 million. newalternativesfund.com

3. Portfolio 21 (PORTX) Focus: Small-cap clean-techs and large-cap
companies with sustainability programs Typical stock: Swiss Re, a
corporate leader in global-warming awareness Five-year return: 7.2%
Minimum initial investment: $5,000 Expense ratio: 1.5% Net assets: $130
million. portfolio21.com

4. PowerShares WilderHill Clean Energy Portfolio (PBW) Focus: Small-cap
clean-techs; holdings are identical to those on the WilderHill Clean
Energy Index Typical stock: Canadian fuel-cell manufacturer Ballard Power
Systems Return since March 2005 inception: 16.04% Minimum initial
investment: $50 Expense ratio: 0.7% Net assets: $664 million.
powershares.com

5. Winslow Green Growth Fund (WGGFX) Focus: Clean-tech and eco-savvy
small- cap companies Typical stock: Zoltek, of St. Louis, a supplier of
carbon fiber for wind turbines Five-year return: 8.2% Minimum initial
investment: $5,000 Expense ratio: 1.45% Net assets: $290 million.
winslowgreen.com

 

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