Those with substantial assets naturally want their wealth to be secure. And a rapid turn in economic markets poses a large threat to the value of financial assets. Before that happens, you can take steps to protect your wealth. Investing in solar not only promotes a healthy future, but also a healthy portfolio.
Wondering how solar will fit into your wealth management strategies? Check out the 5 ways solar investing creates wealth protection.
1) Increased Diversification and Transparency in Asset Allocation
Investment professionals always say don’t put all your eggs in one basket. If too much of your portfolio is invested in a single investment, it’s time for a change. If we don’t invest too much (position size) in any one opportunity and spread our investments around widely (asset allocate), it’s impossible to be wiped out in one fell swoop. Investing your wealth in community-owned solar projects allows you to achieve diversification while knowing exactly where your money is going.
2) Predictable Return on Investment (ROI)
Through Power Purchase Agreements (PPAs), investors can get guaranteed purchase of generated solar electricity from buyers and earn regular investment returns. Many cities across the US negotiate PPAs with solar contractors and homeowners, which create ROI opportunities that include a lower risk than traditional investments.
3) Long-lived Productive Asset
Unlike traditional investments, solar panels are real assets that produce consistent energy over their entire useful life. Most photovoltaic solar panels have 20 to 25 year warranties, but that doesn’t mean they’ll stop working after 25 years. However, the warranty is a good measuring tool when gauging how long your PV system will last.
4) Uncorrelated to Market Volatility
Solar investments offer a hedge against dramatic shifts in global markets. If you’re heavily invested in major corporations or commodities, investing in community-based assets makes sense. Solar investments also hedge against the increasingly systemic risks facing fossil fuels. If you invest in an index or mutual fund, or you keep your savings in an account with a national bank, there’s a strong chance you are financing the operations of some of the world’s largest fossil fuel companies. And recent studies have shown that fossil fuels industries could waste close to $7 trillion in capital expenditure by ignoring risk.
What about if you have solar on your house? How can this help create wealth protection? Investing doesn’t just boil down to investing in assets that support solar, but also include those who invest directly in solar on their own homes.
5) Increased Property Value and Utility Savings for Homeowners
After the upfront loans and capital costs, you will begin to see monthly savings on your electric bill. Those monthly savings will pay back your original investment more quickly than you might imagine. All the money you save after that becomes PROFIT.
And not only will you see an ROI from the electricity saved on utility bills, solar PV systems will also increase your home value. Studies done by the Lawrence Berkeley National Laboratory show that an average size PV system (3 kW) will increase the home sales price premium by about $17,000.
Clean energy looks like it will play a large role in the future of investing and solar is leading the way. Mercer Consultants has estimated that clean energy investment opportunities will grow to $5 trillion over the next 15 to 20 years. When you talk about wealth protection in the future, there may not be a smarter strategy than investing in solar.
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