Energy ETFs: Policy, Solar, Gas, and NuclearEnergy ETFs serve as a strategic tool for capturing growth in specific sectors while reducing the risk associated with individual stocks. Let’s take ETFs in the alternative energy sector (solar, wind, nuclear). They dominate thanks to favorable policies and decarbonization trends. Natural gas ETFs, on the other hand, remain volatile but offer long-term protection against inflation. Yes, North America is a key driver of growth in solar and wind energy, but political instability and regulatory changes have reduced short-term returns.
If we touch on a broader selection of energy ETFs, AMEX:TAN (Invesco Solar ETF) and AMEX:NLR (VanEck Uranium and Nuclear ETF) are worth a look. The former also has broad exposure to subsectors (e.g., infrastructure, utilities). While U.S. solar and wind energy producers are leading the way, the respective ETFs are limited, and TAN is really the main one. In such a context, there is reason to believe that the SEC's decision on the XRP ETF and the impact of Trump's policies on nuclear power play a key role in the selection process. The SEC's approval of the natural redemption Bitcoin ETF and the impact of Trump's policies on the nuclear energy and oil markets are the most relevant here for this purpose.
To the question of the low returns of some energy ETFs, I tend to highlight those that are most affected by political instability. An example of a bad ETF that illustrates the low returns of energy ETFs is reverse ETFs. Indeed, there are many known problems with inverse leverage ETFs such as NRGD.P and DUG.P. These ETFs exhibit high volatility, in part precisely because of their inverse strategies, thereby amplifying market fluctuations and not keeping pace with decarbonization trends. These are some basic examples of bad choices, especially for long-term investors focused on growth sectors.
In addition, a comparison of one-year and three-year returns indicates that short-term volatility is higher, so diversified, low-cost ETFs with a good issuer reputation should be favored. Of course, political risks increase short-term volatility, but they also create long-term opportunities for nuclear and renewable energy ETFs.
