Exploring Tesla Investment Strategies: Clean Energy and Innovation ETFs

Basics

Consider investing in three exchange-traded funds (ETFs) to gain cost-effective exposure to Tesla. Despite its high P/E ratio of 1,076.31, Tesla is a strong player in the market. These ETFs have carefully included Tesla as a primary holding to provide a more stable investment option, reducing the inherent volatility of Tesla's stocks.

VanEck Vectors Low Carbon Energy ETF (SMOG)

Established in 2007, the VanEck Vectors Low Carbon Energy ETF mirrors the Ardour Global Index Extra Liquid (AGIXLT) performance. Focusing on small- and mid-cap low-carbon energy companies engaged in alternative energy, the fund allocates at least 80% of its assets to sectors such as biofuels, wind, solar, hydro, and geothermal power. Tesla commands the top position in the fund, constituting 14.21% of the portfolio, offering substantial exposure to the electric car manufacturer. Noteworthy holdings include Vestas Wind Systems A/S (VWDRY) at 10.15% and Eaton Corporation PLC (ETN) at 8.15%. With an annual management fee of 0.62%, VanEck Vectors Low Carbon Energy ETF boasts $142.6 million in net assets. 

ARK Industrial Innovation ETF (ARKQ)

Launched in September 2009, the ARK Industrial Innovation ETF focuses on companies poised to gain from technological advancements and automation. While the fund encompasses both domestic and foreign securities, a significant portion (86.12%) targets U.S. companies. Tesla leads the allocation at 9.5%, with Materialise NV (MTLS) and 2U Inc. (TWOU) following as the top three holdings. With Morningstar awarding it a five-star rating, the ARK Industrial Innovation ETF manages $317 million in assets under management (AUM). Despite an expense ratio of 0.75%, surpassing the 0.55% category average, the fund's exceptional performance justifies its higher fees. 

First Trust NASDAQ Clean Edge Green Energy ETF (QCLN)

Launched in 2007, the First Trust NASDAQ Clean Edge Green Energy ETF aims to mirror the NASDAQ Clean Edge Green Energy Index by investing predominantly in its constituent securities. This includes U.S.-listed companies at the forefront of manufacturing, developing, and implementing clean-energy technologies. Notably, Tesla holds a 13.42% share in the fund, alongside significant holdings in NIO Inc ADR (NIO) at 9.59%, Albemarle Corporation (ALB) at 5.45%, and SolarEdge Technologies Inc (SEDG) at 5.33%. Despite a 0.6% annual management fee, the ETF's 0.85% dividend yield largely offsets the expense. With $464 million in assets under management (AUM), the fund has surged with a 62.33% year-to-date return and a compelling 32.33% return over the past three years, driven by Tesla's remarkable growth.

Conclusion

Investing in ETFs provides a stable and cost-effective avenue for exposure to Tesla despite its high P/E ratio. The VanEck Vectors Low Carbon Energy ETF (SMOG) and ARK Industrial Innovation ETF (ARKQ) focus on sustainable energy and technological advancements, with Tesla as a key component. The First Trust NASDAQ Clean Edge Green Energy ETF (QCLN) emphasizes Tesla's role in clean energy, contributing to its strong returns. These ETFs offer strategic options for investors navigating the dynamic market landscape.