Investing in Green Mutual Funds to make rich

Recent years, Climate change has become a popular investment theme, giving rise to green stocks and mutual funds that focus on issues such as global warming and alternative energy. According to a survey conducted by Allianz Global Investors earlier this year, Americans believe that changing government policies and other factors will welcome a "golden age" for environmentally friendly investing. Additionally, 78% of investors surveyed think that green technologies have the potential to be the "next great American industry."

Among the larger mutual funds out there are the Winslow Green Growth(WGGFX Quote), Guinness Atkinson Alternative Energy (GAAEX Quote) and the DWS Climate Change(WRMSX Quote) portfolios.

As the chart shows, these funds have lost about half of their value in the past year, more than doubling the 22% decline of the S&P 500 index. These funds serve as proxies for alternative energy and are prone to wide swings. They've gained at least 26% since March 9, keeping pace with the broader market's rally. The Winslow Green fund led the pack, rising 34%.

The poor relative performance of the past year is no reason to give up on the strategy. Most of the stocks in the green space are those of industrial or technology companies. While those sectors lose more value than most industries during slowdowns, they can lead economic expansions. In some ways, it's reassuring that the shares have acted predictably in the past year.

Winslow Green has the most interesting portfolio. It covers the bases of solar and green technology, but its largest holding is WaterFurnace Renewable Energy(WFFIF Quote), a geothermal stock. WaterFurnace shares have lost 5.6% in the past year, outperforming the S&P 500.

DWS Climate Change's portfolio is a bit of a disappointment. At year-end, its top holdings included General Electric(GE Quote), United Technologies(UTX Quote) and Siemens(SI Quote). All three are active in the space, but their alternative energy divisions are too small to move the needle for any of them.

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