Shares of Tesla Motors (NASDAQ:
) are up 26 percent in the last five trading days and are sitting
at a fresh three-month high.
The big volume move in the stock has once again attracted the
attention of investors after several months of the stock drifting
Investors have the option of buying Tesla stock outright and
taking the risk of owning an individual stock. Or there is the
route of buying an ETF that has large exposure to the stock and
some of its peers.
The First Trust Clean Edge Green Energy ETF (NYSE:
) calls Tesla its largest holding with a weighting of 9.6
percent. There are a total of 43 stocks in the ETF that come from
a wide range of niche sectors, all related to green energy. The
other stocks in the top five include LED lighting company Cree
), circuit maker Linear Technology (NASDAQ:
), solar company First Solar (NASDAQ:
), and utility ITC Holdings (NYSE:
Tesla Announces Expansion of Supercharger Network
As mentioned above, the ETF is diverse with 38 percent in
technology stocks, 23 percent in oil and gas, 17 percent in
industrials, and 10 percent in consumer goods. The diversity
should in theory lower the risk associated with the ETF, but it
could also limit the upside potential.
The annual expense ratio for the ETF is 0.60 percent and the
ETF has a total of $120 million in total net assets.
Since the end of September 2013, Tesla stock has fallen by
nine percent. During the same time frame QCLN is up 17 percent.
This is one example of how an ETF can protect investors from the
high volatility that is associated with a stock such as Tesla. On
the flip side, in the last 12 months QCLN is up 92 percent as
Tesla surged 409 percent.
The question investors must ask themselves has to do with
reward versus risk.
Is the extra risk associated with owning Tesla over QCLN worth
the potential reward?
(c) 2014 Benzinga.com. Benzinga does not provide investment
advice. All rights reserved.
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