Invest in Ethanol Mutual Funds

With the U.S. reliance on foreign oil becoming a less tenable position by the day, many investors are trying to invest in the future of ethanol. Traditionally derived from corn, ethanol is now being produced experimentally with wood chips and grasses, which is one reason why everyone from Bill Gates to Richard Branson is investing in ethanol. Though ethanol mutual funds are still rare, there are opportunities available now.

Learn about the ethanol market by researching online.

Research the two main mutual funds that are built around alternative fuel companies. These are the New Alternatives mutual fund and the PowerShares WilderHill Clean Energy Portfolio.

Order the prospectus for each fund and read them carefully.

Decide whether you'd like to put all of your investments into alternative fuel. If so, make your investment directly with the fund or through an investment advisor or broker.

Tips & Warnings

• If you want to invest in ethanol but not as a primary focus, consider investing in a socially responsible mutual fund that includes alternative energy companies within a broader set of holdings.
• Get online and visit the SocialFunds website (link can be found in the Resources section below) to see the biggest list of socially responsible funds. Many of these carry some alternative fuel holdings within their holdings, as well as a variety of other well-performing companies whose management strategies fit within the ideology of that particular socially responsible fund.
• Ethanol use is a meager 3 percent of the U.S. consumer car fuel market, even though most cars can handle fuel containing 10 percent ethanol, and some able to take 85 percent, or E85.
• The possibly explosive future comes from finding affordable sources in addition to corn. This research is still in the relatively early stages although signs look promising. Investment-wise, most mutual fund companies still see ethanol companies as too big a risk to include in their portfolios.
• You may be stymied by the lack of investment opportunities in ethanol. This is because, at this stage, many of these companies are not publicly traded entities.
• On a related note, if you're looking to the major mutual fund companies as a source of ethanol mutual funds, or even alternative fuel mutual funds, you will be out of luck. They simply do not yet see this sector as strong enough to support a mutual fund.