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Clean Energy ETFs Are Struggling in 2021—Is It Time to Buy?

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Mar. 15 2021, Published 1:14 p.m. ET

Despite a rapturous year behind them, clean energy ETFs have experienced obstacles in their path YTD. Investors wonder whether they're worth the hold or buy.

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Even when you know that long-term investments can be lucrative, seeing your portfolio in the red tends to be disheartening. All things considered, ETFs in the clean energy sector remain a preference—perhaps now more than ever.  

Which clean energy ETFs are struggling?

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The Invesco WilderHill Clean Energy ETF (PBW) saw 197.44 percent returns over the course of 2020. After climbing even further through Feb. 9, the shares started to drop. Now, the basket remains 4 percent in the green YTD, but 20.4 percent down from the February peak.

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Although the iShares Global Clean Energy ETF (ICLN) grew 137.9 percent in 2020, it has seen a 12 percent dip YTD. The historically high-performing Invesco Solar ETF (TAN) is also down 7.89 percent YTD, despite a 223.86 percent growth in 2020.

An index fund basket, the First Trust NASDAQ Clean Edge Green Energy (QCLN) is up 3.12 percent YTD, but the shares have fallen 17.23 percent since their own Feb. 9 peak. Compared to a 177.15 percent growth in 2020, this is noteworthy. The ALPS Clean Energy ETF (ACES) is in the same boat. 

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Clean energy poses an opportunity in the years to come

For investments like clean energy ETFs, intermittent dips are nothing if not buying opportunities. Most likely, these baskets are seeing volatility in response to their majorly green returns in the previous year. The same goes for the ARK ETFs, which are almost all down YTD despite a strong fiscal year behind them. This behavior is known as a market correction.

Now that President Biden is in office, his climate-oriented policy is moving forward. Of course, there have been some obstacles, but he's already signed executive orders like pausing oil and gas drilling on federal lands and waters pending review of energy leases. He also rejoined the Paris climate accord. 

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With Brenda Mallory picked as head of Council on Environmental Quality, clean energy companies could be facing their day. 

Buy, sell, or hold clean energy ETFs?

Long-term investments in ETFs are a smart move overall, but this is especially true for the clean energy sector. Shifts in how we create and expel energy are required for a sustainable future. In this case, a dip isn't a red flag, but rather a buying opportunity in what looks like marked long-term growth. Clean energy ETFs didn't have their 15 minutes of fame. Instead, they're just taking a break.

With that in mind, adding to your existing investment or simply holding your stake would be wise, and I'm not the only one who thinks so. Todd Rosenbluth, an ETF researcher for CFRA Research, told MarketWatch, "We are still long-term bullish for the overall trend toward clean energy." He added, "Investors may consider moving to get in front of that." 

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