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$10,000 Invested in This ETF Could Send Your Kids to College

By James Brumley - Mar 16, 2021 at 9:20AM

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Investors facing steep tuition bills in the distant future can't quite settle for merely average market returns.

The average cost of a four-year college degree currently stands around $40,000, though once food and housing expenses are added to the mix, the price of an education can approach six figures.

In other words, higher education ain't cheap. Most people and families can't afford it without significant financial help.

Investing in the stock market could be that help. The S&P 500 roughly doubles in value every eight years, but that progress is volatile and inconsistent. You may not have all the money you need when it's time to start school.

You'll also still need to start with quite a bit of capital to fully fund four years of college if your plan is to utilize index-based instruments like the SPDR S&P 500 ETF Trust (SPY -1.68%). If you need a higher-octane opportunity but still don't want to start picking stocks to grow a college fund, the iShares Global Clean Energy ETF (ICLN -1.35%) is worth a look.

The clean energy revolution is under way

Stocks ended up doing surprisingly well last year despite the pandemic. But it was a banner year for clean energy and renewables stocks. The iShares Global Clean Energy ETF gained 140% in calendar 2020, while related peers such as the Invesco WilderHill Clean Energy ETF (PBW -3.73%) and the First Trust NASDAQ Clean Edge Green Energy Index Fund (QCLN -2.77%) fared even better even better thanks to significant exposure to last year's high-flying names like Nio (NIO -6.07%) and Tesla (TSLA -4.62%); the iShares Clean Energy ETF doesn't own either of these stocks.

That decision left some money on the table in 2020 to be sure. But it also tells us Invesco's Clean Energy fund is tightly focused on clean energy production and not enchanted by the always volatile (and often unpredictable) electric vehicle market.

That matters.

Glass jar with coins in it labeled "college."

Image source: Getty Images.

See, while 2020 was a big one for renewables and clean energy names, it wasn't a fluke. The clean energy revolution has been brewing for years and hit something of a critical mass last year. According to numbers from the Solar Energy Industries Association (SEIA), in the United States alone we added 19 gigawatts worth of solar power production capacity, breaking annual installation records as a result. Wind power infrastructure grew at a record pace too. The American Clean Power Association reports wind power capacity expanded by 17 gigawatts in 2020. The rest of the world similarly ramped up its clean-and-green energy production. In the same vein, purchases of plug-in, battery-powered automobiles soared to 3.2 million in 2020, breaking another record in the process.

It's all just the next chapter of a worldwide saga, marked by the embracing of new energy technologies at the expense of older, carbon-producing alternatives.

Here's the thing -- as rapidly as renewables and clean energy production are growing, we've only scratched the surface.

The U.S. Energy Information Administration (EIA) reports that only 12% of last year's electricity generated in the U.S. came from renewable sources. Nuclear power is still a bigger source of energy for the nation, while fossil fuels still account for a whopping 60% of the country's power production. The world's electricity production profile is even dirtier.

All of that fossil fuel power is on the chopping block though, so to speak, now that consumers, governments, and even utility companies themselves are working on a paradigm shift in where our power comes from. President Joe Biden made this shift a key part of his campaign. A survey performed by Parks Associates says 43% of consumers prefer utility companies in the wind and solar business. Utility company Consolidated Edison aims for a 100% clean power production portfolio by 2040.

These are just goals, ideals, and preferences, of course, but they're also a reflection of a huge clean energy movement starting to get serious traction.

A little patience is needed

Consolidated Edison's timeframe speaks volumes about the importance of patience here. The year 2040 is 19 years away, and as much as Democrat leadership may want to lead a clean energy revolution, it's obviously going to take years to make a meaningful dent.

Investors won't necessarily have to wait for a completed revolution to be rewarded, however, even if they have to ride out a few cyclical headwinds. The EIA believes that as soon as 2022, about 16% of the country's power will be coming from renewable sources, meaning these sources alone will improve their current power output by nearly 30%. In the bigger picture, the International Renewable Energy Agency estimates the world will need to invest over $100 trillion in the effort by 2050 to reduce current levels of carbon emissions by 90%.

A big chunk of that investment is already making its way to the companies that make up the iShares Global Clean Energy ETF, but we've only just begun. It wouldn't be hyperbole to say the clean energy sector is now where the internet and e-commerce sector was in the late '90s, whereas electric vehicles are closer to where web-facing companies were in the early 2000's...with their highest-growth days behind them. That puts Invesco's and First Trust's aforementioned funds at a slight (albeit only slight) disadvantage compared to the iShares fund.

Bonus: The iShares Global Clean Energy ETF offers investors a chance to own a piece of companies like Vestas Wind Systems (VWDRY 4.15%) and Siemens Gamesa Renewable (GCTAY 2.39%), which can be a bit tricky for the average U.S. investor to trade.

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Stocks Mentioned

iShares Trust - iShares Global Clean Energy ETF Stock Quote
iShares Trust - iShares Global Clean Energy ETF
ICLN
$18.93 (-1.35%) $0.26
SPDR S&P 500 ETF Trust Stock Quote
SPDR S&P 500 ETF Trust
SPY
$390.24 (-1.68%) $-6.68
Tesla, Inc. Stock Quote
Tesla, Inc.
TSLA
$643.71 (-4.62%) $-31.19
Consolidated Edison, Inc. Stock Quote
Consolidated Edison, Inc.
ED
$98.33 (0.67%) $0.65
PowerShares Exchange-Traded Fund Trust - PowerShares WilderHill Clean Energy Portfolio Stock Quote
PowerShares Exchange-Traded Fund Trust - PowerShares WilderHill Clean Energy Portfolio
PBW
$48.56 (-3.73%) $-1.88
Vestas Wind Systems Stock Quote
Vestas Wind Systems
VWDRY
$8.15 (4.15%) $0.33
First Trust Exchange-Traded Fund - First Trust NASDAQ Clean Edge Green Energy Index Fund Stock Quote
First Trust Exchange-Traded Fund - First Trust NASDAQ Clean Edge Green Energy Index Fund
QCLN
$50.55 (-2.77%) $-1.44
Nio Inc. Stock Quote
Nio Inc.
NIO
$15.03 (-6.07%) $0.97
Siemens Gamesa Renewable Energy, S.A. Stock Quote
Siemens Gamesa Renewable Energy, S.A.
GCTAY
$3.81 (2.39%) $0.09

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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