ALTERNATIVE RESOURCES MUTUAL FUNDS

SYED ALAMDAR ALI
Hailey College of Banking & Finance Lahore
Mar 17 - 23, 2008

A mutual fund is a professionally-managed firm of collective investments that pool money from many investors and invest it in stocks, bonds, short-term money market instruments, and/or other securities. A mutual fund is therefore an investment company that looks for small companies that have growth potential and then it invests in them. Mutual funds can invest in many different kinds of securities. The most common are cash instruments, stock, and bonds, but there are hundreds of sub-categories. Stock funds, for instance, can invest primarily in the shares of a particular industry, such as technology or utilities. These are known as sector funds. Bond funds can vary according to risk (e.g. high-yield junk bonds or investment-grade corporate bonds), type of issuers (e.g. government agencies, corporations, or municipalities), or maturity of the bonds (short- or long-term).

The world comes closer and closer to resources crisis such as the depletion of non-renewable resources like coal and oil etc. This is the reason so many companies are scrambling to develop alternative sources of resources. They need money to do this, and alternative resources like mutual funds can supply the money. Alternative resources mutual funds invest in companies that are developing ways to produce resources without harming the environment.

Energy is considered as the most important "resource" in the modern world today. Mike Batta a famous researcher in the field of alternative resources of energy has demonstrated this issue of making the energy resource availability by stating that "Alternative energy is culled from the natural resources of the earth, such as wind, sun and air. Unlike the non-renewable sources of energy, these sources will continue into the future. People who invest in alternative energy mutual funds may not have to worry about their future. But there are risks to be considered with alternative energy mutual funds."

Alternative energy mutual funds are very recent phenomena. The companies that have been primarily involved in establishing such type of entities are investing in different countries so that they can keep their investments diversified and take advantage of growth opportunities. There are also foreign exchange risks in this. But there are also many more risks that may have to be faced when considering investing in alternative energy mutual funds. Nevertheless, at the end helping the earth is worth the risk!

There are some viable alternative energy technologies that are not yet cost effective due to their initial stages of development. The alternative energy mutual funds need to be selective about which firms they invest in. They have to make sure the company meets the environmental standards they may have, as well as the ability to use new technologies.