Aztext Press

Life Off-the-Grid

Mutual Funds vs. Solar Panels

I don’t know about you but I never had much luck with mutual funds. I used to research them extensively. Once I found one with a great track record, as soon as I invested, its returns tanked and I got frustrated. It didn’t seem to matter how much research I did, I always came out on the losing end of the proposition. For a while I moved into Exchange Traded Funds (ETFs), which merely tracked indexes. My attitude was that if 50% of mutual funds didn’t outperform the market, why pay some guys in suits to lose my money. Eventually as I saw the economic storm clouds of the housing bubble/credit meltdown/peak oil building, I just moved into cash.

Well, some of my money I moved into cash, and some of it I moved into “hard assets”. The first was more PV panels. With demand for them so high in the world, the prices seem to be staying fairly consistent, so from a strictly economic point of view, they are a sound investment. When you factor in energy savings and incentives from some governments, they look even better. In my case living off-the-grid, I can’t pump back into the electricity lines, but I can use the extra electricity for things like replacing propane in cooking. And when the sun does shine, my batteries get a much better charge now. This has helped me reduce my reliance on my fossil-fuel-powered generator, which I rarely run.

Next I invested in a wind turbine, which has given me even more power, especially in those swing months in the fall when you have less sunshine. This was a great investment. In “$mart Power”, William Kemp calculated the payback on renewable energy electricity generation at about 5%, which is conservative since it does not include any government incentives. With the rates you can get on GICs right now, this return is excellent. Now I’m investing in a solar thermal system to reduce my reliance on propane for hot water. The 6 or 7-year payback on a domestic solar hot water heater that Bill calculated could be conservative with the volatility of fuel prices. This exceptional return is around 10%. Are any of your stocks or mutual funds returning that right now? Well Bernard Matoff’s hedge fund was returning 10 to 12% consistently, but it was a Ponzi scheme so it doesn’t count.

The Japanese Nikkei stock market index hit a peak of 38,915 in 1989. With high levels of Yen flooding their market it created an American housing bubble style inflation. When the bubble collapsed the money dried up and the Nikkei tanked. The Nikkei could not regain that lost ground through the 1990s and 2000s. In December of 2008 the Nikkei was around 8,500. This is not a developing country but the industrial powerhouse of Japan. So if you invested $10,000 in 1989, you’d have less than $2,500 today. Not a bad return on investment. 20 years later your investment was worth 75% less than when you started.

Many of us are under the illusion that stock markets always go up, or at least over the long term they will. When there is a crash though, the question is how long will it take you to recoup your losses. You’re probably thinking, “why would someone have invested at the top of the market in Japan”, forgetting that the wisdom of the day was that that was the place to be.

Closer to home, the Dow Jones Industrial Average was close to 14,000 last January, and in November was close to 7,000. Many of us have seen this in the statements we get from our financial institutions. Some of those same institutions are suggesting it may be a good time to get back in the market. This can be a little hard to take after watching 50% of our money evaporate.

I would suggest that we are not at the bottom at this market and that it’s now time to take a big picture look at what you should do with your money. If you’re sitting on cash, perhaps you want to hang on a little longer until some stability returns to the market. In the meantime there has never been a better time to invest in hard assets, like renewable energy. Power grids are taxed and utilities across North America have struggled to keep up investment in maintaining the infrastructure and generating fleet. Solar and wind power help inflation-proof your family from the increases that will be required by these power providers, and make sure the lights stay on when the power goes out.

An investment in a solar thermal unit to heat your domestic hot water will help you avoid the price instability that natural gas users experience. The 5-year trend in natural gas prices is steadily up, and as we drill more wells and discover less gas, this is going to be reflected in your gas bills. So you inflation-proof your family, and you make an investment in a technology that has an excellent pay back. And as an added bonus, you reduce your carbon footprint dramatically.

Here is a quote from the novel “Saturday” by Ian McEwan, the author of “Atonement”. “The old folk crouching by their peat fires will tell their disbelieving grandchildren of standing naked mid-winter under jet streams of hot clean water, of lozenges of scented soaps and of viscous amber and vermilion liquids they rubbed into their hair to make it glossy and more voluminous than it really was, and of thick white towels as big as togas, waiting on warming racks.”

Right now you could be using the sun to create those jet streams of hot clean water for your family to stand under, without creating any greenhouse gases, while lowering your gas bills. What was that you were waiting for again?

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