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  • Investing in a Hydrogen ETF – TIPS & TRICKS
  • Investing in a Hydrogen ETF – TIPS & TRICKS

Investing in a Hydrogen ETF – TIPS & TRICKS

Investments in hydrogen ETFs

By investing in a hydrogen ETF, you are responding to the global trend of sustainable investments . It is a given that governments worldwide are trying to act CO2-free in the future. This is necessary to combat the problem of global warming. The use of clean energy sources such as hydrogen is seen as part of the solution. With a hydrogen ETF, you can also respond to this trend on the stock exchange. In this blog you can read more about the hydrogen ETF, also called hydrogen ETF.

An ETF: what exactly is it?

A fund that tracks an index, a bond or a commodity or a combination of products is also called an ETF. An ETF makes it possible to closely track the value of the underlying products. If you want to know more about this type of financial product, it is useful to read our article about ETFs .

Hydrogen as an energy source

Hydrogen is obtained from water molecules and this is seen as a sustainable energy source. It is a powerful energy source because of its high degree of energy density. It is even used to power airplanes, buses or large ships, while other sustainable sources of energy fall short in this. It is therefore not without reason that it is presented as the green alternative to fossil fuels.

Hydrogen gas in free form is almost non-existent on earth and is therefore derived from other substances such as water and natural gas. In order to be able to extract energy from hydrogen in a CO2-neutral way, it is also necessary to produce hydrogen sustainably. The advantage of hydrogen is that it is a good energy carrier. This allows storage of the energy extracted from hydrogen. For example, a surplus of solar energy could be stored in hydrogen and then used in the winter.

Why invest in a hydrogen ETF?

The trend to invest in sustainable initiatives is taking shape in the form of investments in hydrogen. For a fairly long time, hydrogen has been considered a responsible alternative to traditional fossil fuels. At the beginning of this century, the then reigning American president Clinton talked about ‘the fuel of the future’. The idea at the time was that the next generation would drive cars on hydrogen.

We can now conclude that the ideas of that time were not entirely realistic. The fact is that the interest in such ideas that has diminished over time is now being rekindled. The reason for this is the great attention for climate change. Hydrogen is now considered one of the major green energy carriers for the coming period. However, it is true that applications with hydrogen are not yet offered on a large scale. Also in view of the practical side, this application will not be realised without a struggle. Think of matters such as safety and distribution.

Diversification with a hydrogen ETF

To invest in hydrogen in a safer way, ETFs are a suitable tool. This segment in the energy sector is still developing and therefore subject to change. The market is divided into a number of companies. It is not without risk to invest in the various companies separately, as the hydrogen market is still changing rapidly. The advantage of ETFs here is that risks are spread and that investors benefit from the total growth of the hydrogen market.

What about the risks of a hydrogen ETF?

We have just read that the hydrogen energy market is still changing rapidly. Obstacles in the field of technology and infrastructure must be taken into account. It is therefore not possible to say with great certainty that the expected growth will also come.

In short, it comes down to the fact that investing in hydrogen at an early stage can be a smart way to invest. It is good to choose an investment with risk diversification, as is the case with ETFs. You should be aware that there is always risk. There is still the possibility that hydrogen will not become a sustainable energy source. In that case, the risk of this form of investment is quite high. For example, a scenario is conceivable in which governments will stop investing in hydrogen, which means that this industry no longer has a chance. In addition, it is questionable whether this economy lends itself to a lucrative revenue model.

Hydrogen ETF: A Hype

To mention another risk: the industry is still in its infancy and is a hype. At the moment, it is assumed that hydrogen will play a significant role in 2050. The potential that is now attributed to hydrogen is already reflected to some extent in the  share price .

In general, this is based on hype. You will then notice that the shares are shooting up in price, while these shares will certainly not be able to meet their assigned value in the coming decades. A peak is already being reached and it will take a number of years before a hydrogen ETF can rise above this point again. With this scenario, it means that you will make little or no profit for years. A good remedy to compensate for this is to invest a small amount in hydrogen ETFs on a planned basis, for example every month, and to invest on a larger scale in the event of significant price drops.

The Best Hydrogen ETFs to Choose

Do you have a special interest in hydrogen or do you think hydrogen ETFs are a good choice for your  investment portfolio ? By investing in ETFs you can certainly better divide your equity portfolio in an efficient way.

It is good to know that there are differences between hydrogen ETFs in price, risk, fund size and underlying value. There are hydrogen ETFs that track different indexes or companies. Some of these ETFs pay dividends and other ETFs do not.

Below are two reputable and widely traded hydrogen ETFs in 2021:

  • L&G HYDROGEN ECONOMY UCITS ETF USD ACC
  • VANECK VECTORS HYDROGEN ECONOMY UCITS ETF USD A.

Investing in ETFs

Would you like to invest in ETFs?  DEGIRO  is a suitable broker for investing in ETFs, because of the core selection many ETFs can be purchased for free. The broker also has a large selection of ETFs.

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