When investing for fossil fuel free growth and income in the stock, bond markets, remember nothing is guaranteed - and investment trends change as life (economics, politics, and our climate) moves forward.
The key to investing is to do your research using at least some of the tools made available here - as well as other reliable financial information sources that do not work off of greed and fear.
For example, DO NOT listen to what the business cable channels like CNBC or Fox Business recommends. They are simply marketing channels for money management firms.
Also, be open-minded, flexible, and try to keep your money as liquid as possible - except when you can’t - like when investing in your employer's payroll reduction retirement plan (401K, 403b, and 457 programs) that have limitations on investment choices.
Furthermor, regarding your payroll-reduction retirement plans, whenever possible, if you leave employment you should almost always initiate a tax free transfer of your vested payroll reduction retirement plan money to an individual rollover IRA (unless you plan to return to the same employer at a later time).
Basic Rules of both profitable and prudent “Fossil Fuel Free” Investing:
It is important to understand and integrate the following rules of investing – simple rules that have proven to be reliable 80% to 90% of the time:
1. When the global stock markets are in a “bull market” uptrend, it means that “growth stock” mutual funds and ETFs (electronically traded mutual funds) are usually the best asset class to be invested in.
“Growth” means being invested primarily in the areas of 1) technology, 2) Industrials, 3) consumer discretionary, 4) biotechnology, and 5) financials (keep in mind the larger publicly-traded financial firms invest in fossil fuel companies and projects).
By default, these “growth” sectors of the global economy are also the most fossil fuel free areas to consider for your investment money.
2. The defensive investment areas (or “sectors”) of the economy are 1) health care (ex-biotech), 2) consumer staples, 3) materials, 4) utilities, and 5) energy (mostly fossil fuel companies).
Obviously, the highest percentage of fossil fuel holdings are going to be in the energy and utilities sectors, with the latter using coal and "transitional" natural gas to power their utility plants.
Research shows that almost 50% of all utility companies use large amounts of coal or natural gas to power their energy production for the communities they serve.
3. In many cases, “social responsible investing” – or SRI investing - does not necessarily mean “fossil fuel free.”
Be aware that some fossil fuel free mutual funds may very well have questionable “social value” companies within their portfolio of investments, including the investment banks that mindlessly fund the polluters and pipeline companies (JP Morgan Chase is a prime example) - or companies that promote or support homophobic legislation (e.g. Cracker Barrel, Urban Outfitters, etc.) or legislation that denies responsible adult women their reproductive health care choices.
Additionally, never assume that an investment firm that has been endorsed by an organization you trust is as "pure" as they say they are. This warning can even apply to the national 350.Org and its adopted financial research partners.
Always do your own research with every investment you are considering. Read between the lines and cross-reference your sources.
4. Don’t be fooled by the so-called “increased safety” of income producing, dividend-paying stock mutual funds.
Fact: When the stock markets are headed down, dividend paying mutual funds will also decline. Additionally, dividend paying investments do not do well in a rising interest rate economic climate, unlike some "growth" sectors.
On the other hand, growth stock mutual funds go up much more than dividend-paying stock mutual funds when the markets are in a “bull market" uptrend.
Additionally, most of the world’s biggest polluters pay “nice” dividends to their shareholders. Hence dividend-paying mutual funds are more likely to be riddled with fossil fuel stocks that you will want to avoid.
It is useful to know that in most cases, “value” focused mutual funds are often just another name for dividend paying investments - also with a much higher concentration of fossil fuel investment holdings.
Again, do your research. And expect a normal short learning curve re: fossil fuel free investing. It can be fun and financially rewarding - as well as empowering.
Part 1: Fossil Fuel Free and Renewable Energy Investment Portfolios
Given the basic investment tenets described above, the most accessible fossil fuel free investing vehicles will be available in these investment vehicles:
1) ETFs (electronically traded funds);
2) individual stocks;
3) Yieldco’s (portfolios of structured renewable energy utilities generating high income);
4) traditional mutual funds (aka “open-end funds”) in payroll reduction retirement plans;
5) debt instruments issued by renewable energy focused assets (bonds); or
6) a combination of all the above.
Other than the more risky and volatile individual stocks, the best investments for renewable energy self-management investing are ETFs (a list of fossil fuel free ETFs and some specific renewable energy focused ETFs are provided below).
For employer-sponsored payroll reduction retirement programs such as 401k / 403b / 457 plans, investing in traditional “open end mutual funds” are the norm.
Here is a partial list of some widely used fossil free investment vehicles for 350 Austin members and supporters:
U.S. Fossil Fuel Free Investments with Fund Symbol & Category:
QQQ - Nasdaq 100
IWF - Russell 1000 Growth
IVW - S&P 500 Growth
VIG - Vanguard Dividend Growth
IWP - Mid-Cap Growth
IJT - Small-Cap Growth
GCEQX - Green Century Equity
GCBLX - Green Century Balanced
XLK - Technology
XLV - Health Care
XLI - Industrials
IBB - Biotechnology
VNQ - Real Estate
PBW - Clean Energy (diversified)
TAN - Solar Energy
FAN - Wind Energy
GRID - Smart Utility Technology
Fossil Fuel Free Europe / Asia Investments:
FIEUX - Europe (Fidelity)
HEDG - Europe Equity
SCZ - Developed Eurasia Small- Cap
MASGX - Asia ESG (Matthews)
Note: For reliable investment risk aversion, all publicly-traded investments should always be “technically” screened for the "14 Week RSI Above or Below 50" rule (see Part 2).
Part 2: Maximizing “fossil fuel free” investment profits - and how to reduce investment risk and volatility:
First and foremost, to be a smarter, better-informed investor, try to learn some rudimentary knowledge of investment technical analysis. The global investment profession (which an individual investor wants to replicate using one’s own sane economic and social values) use technical analysis more and more due to the following recent economic trends:
(1) the global macroeconomic money movement shift of international financial leadership away from the U.S. to Europe and Asia;
(2) a counter-resurgence of anti-nationalist economic policies that again focuses on a saner redistribution of wealth - which includes reversing growing income inequality, xenophobic scapegoating, and neofascist pro-elitist tax policies;
(3) the proliferation of global high frequency computerized trading by huge financial firms.
Second, if you don’t have time to learn technical analysis due to your busy lifestyle, follow two simple technical analysis investment rules:
1) Only Buy an investment security when the 14 Week RSI is above 50 (but not above 70)
2) Always Sell an investment security when the 14 Week RSI moves below 50.
Note: Most discount brokerage firms have a simple technical analysis tool available at their website. Use this valuable tool provided by your custodial investment firm.
FYI, the highly reliable “14 Week RSI Above and Below 50 rule is a simple technical analysis rule that will give you the freedom from ever having to use or pay an investment advisor again).
Part 3: Using an Investment Advisor
Keep in mind that most investment advisors are compensated under what is essentially a “network marketing” pay arrangement. The insurance industry - selling annuities - is most like a network marketing firm. Independent fee-only advisors working with one of the discount brokers is the least like a network marketing firm.
When using a big well-known investment firm, unless you have $500,000 or more, you are getting the youngest and least experienced advisor in the investment firm. As such, the least experienced advisors are trained to recommend investments that their supervisors want them to sell. Often these investments are “proprietary” investments (with the Firm's name on it) that may provide the firm with higher commission income or fees in one form or another.
Commission-compensated brokers primarily recommend "load” open-end mutual funds. FYI, the "old-guard" open-end mutual funds are identified by 5 letter symbols, e.g. VGINX.
Investment advisors that are fee-only compensated from total assets under management primarily use ETFS and individual stocks for growth - and bond ETFs (and/or Yieldco’s for renewable energy assets production investment income).
Reminder: When you identify a short list of preferred “fossil fuel free” investments that fit your personal values - remember to use the "Buy only when the Weekly 14 RSI is above 50" or the "Sell when the Weekly 14 RSI is below 50" rule.
Summary and Conclusion
As far as fossil fuel free investing goes, you never need to hold any investment that includes more than a 2-3% weighting in dirty energy stocks or bonds. Comparatively 2-3% is less than half the national average for most mutual fund investments.
FYI, the Standard and Poor 500 stock index, the bellwether US stock market index which accounts for 85% of U.S stock market value, has a 5-6% fossil fuel stock weighting.
The two biggest mistakes investors commit are 1) thinking they understand investing and 2) not willing to admit they don’t understand investing. Yes, ego and pride. Just look at the incompetence of Donald Trump.
Remember, always use the “Fossil Fuel” Investment Analysis tool at https://fossilfreefunds.org. Simply type in your mutual fund or ETF symbol to see the dirty energy percentage currently being held in that specific investment holding.