Solar energy is a long-term play for investors. Just 3% of electricity generated in the U.S. in 2020 was due to solar power, according to data from the U.S. Energy Information Administration. However, by 2050, it expects that percentage to rise to 20%. That's a long time from now but as consumers become more concerned about the environment and demand more sustainable sources of energy, this shift looks to be inevitable.
Many solar energy stocks are bound to pop up over the years, looking to cash in on the industry's growth. For investors, a good way to gain exposure to the industry is by investing in the Invesco Solar ETF (NYSE Arca: TAN). The exchange-traded fund (ETF) focuses on companies that are in solar energy and it is rebalanced every quarter.
Nearly 60% of the stocks are in information technology, 22% are involved with utilities, 14% in industrials, with the remainder being in materials and financials. The ETF's focus is primarily on the U.S., with more than half of its holdings based in that country. Chinese companies account for another 20%, and after that, no other country accounts for even 6%. The top three stocks in the fund account for 30% of its weight. They include Enphase Energy (NASDAQ:ENPH), SolarEdge Technologies (NASDAQ:SEDG), and First Solar (NASDAQ:FSLR).
The ETF has an expense ratio of 0.66% and year to date, the fund has risen 10% in value (versus the S&P 500's decline of 11%). There won't be any diversification outside of solar energy with this fund, but if you're bullish on the industry, the ETF can give you some great exposure to it.