Why you should add energy investments to your portfolio

 

If you haven’t considered energy investments so far, it’s about time.

There are several factors which add to the validity of investments in the energy sector.

As the most valuable market segment globally, the energy sector makes up 10% of the worldwide gross domestic product. Tying onto that, the stability and the projected growth pf demand are promising as by 2035 the world energy demand is expected to grow by 30% and the fluctuations are limited due to the inevitability of energy for our lives, leading nine out of the ten highest grossing companies to be operating in the energy sector.

While high revenues do not necessarily translate to high profitability, in this case they do.

Looking at the Energy Select SPDR ETF – which holds a wide variety of energy companies – one can see that it outperformed the Dow Jones Industrial Average by more than 220% over the last 15 years.

If you, however, happen to choose to invest directly, there is a wide variety of options for you to choose from. The energy market is so big that it encompasses a diverse array of market sectors. Oil, gas, coal, and nuclear energy only scratch the surface of the industry’s offerings.

Moreover, many investors consider other factors of their investment besides the economic implications. Naturally, investments in renewable energies have a positive environmental impact compared to traditional energy source like oil, gas & coal: Photovoltaic plants for example produce 30 times less CO2 emissions over their lifetime than coal power. Furthermore, for investments in developing countries, the social impact is exponentially higher than in developed countries, increasing the local quality of life sometimes drastically.

Finally, the energy market offers a wide variety of risk profiles for you to choose from.

While mature companies on the stock market offer moderate returns, there are various small and highly innovative players – especially regarding energy storage and smart-grid topics – which offer high return potential and fit higher risk profiles. While experienced investors have the possibility to invest directly, many venture capital companies manage funds which invest in early-stage or growth companies within the energy sector.

 

This blog shall not be construed as any form of offer or inducement to enter into any investment contract or to purchase any investment product or as advice on either of the foregoing.

Thomas Helige, 13. April 2017, 16:41

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