Investing in Traditional and Alternative Energy Sources
The growing global demand for energy and the need to develop alternative sources of energy (“green,” “renewable,” “clean”) are prompting investors to seek out promising securities in the energy sector.
Promotional campaigns highlight investments in traditional and alternative energy sources, lauding the growth potential of companies operating in those sectors. They mention wind turbines, solar energy collectors, ethanol, biodiesel, petroleum deposits, geothermy, natural gas, and the like.
Be careful. Unscrupulous promoters are taking advantage of the renewable energy craze to defraud investors.
Using expressions such as “green energy investment opportunities,” they try to attract investors interested in ethical and responsible investing. The terms “green” and “alternative” energy tend to indicate that a company is associated with environmentally-friendly green power generation. However, in some cases, the company is nothing but an empty shell that does not produce anything at all.
Before investing in the energy sector, be informed
Ask for a copy of the prospectus. Some issuers may be exempted from the requirement to prepare a prospectus in order to sell securities, but only under certain conditions. Most securities issued without a prospectus are only suitable for certain types of investors, such as accredited investors who have above-average income or assets.
Investments in the energy sector, just like investments in the mining industry, can be risky. Do you have the means to lose all or part of your investment? For example, a lot of extensive and costly research and work are required between the discovery and the exploitation of a petroleum deposit.
Make sure you really understand the nature of the investment and the risks it entails. Are you being offered shares, bonds, exchange-traded fund units, limited partnership units or options? Don’t invest if you don’t understand the proposed investment.
Ask questions. What are the risks? There is no such thing as a high-yield investment without risks.
Are you familiar with the so-called leading-edge technologies promoted by the company in which you are being urged to invest?
Who is proposing the investment?
Be wary if you are approached by strangers, especially if they are insistent, call often and enthuse about “guaranteed high-yield” investments.
Get information about the company and the people proposing the investment.
Ask for advice from a trustworthy investment dealer you already know or who is recommended.
Don’t just rely on a fancy website. Scammers can easily design sophisticated sites, full of graphs showing fabulous profits and photographs and videos of modern facilities. In fact, here is an example of a very convincing fake website: BlueHedge Investments.
If it looks too good to be true, don’t invest.