☀️Harnessing the Sun: The Invesco Solar ETF (TAN) Opportunity

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As global markets evolve with shifting energy dynamics, we are excited to highlight an ETF that provides exposure to one of the most promising sectors in renewable energy: the Invesco Solar ETF $TAN ( ▲ 1.56% ) . This ETF offers a unique opportunity for investors seeking to incorporate sustainable energy investments into their portfolios.

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What is TAN?

The global energy landscape is transforming rapidly, with solar power emerging as a key element of clean energy. It is expected to play a vital role in helping countries achieve sustainability goals and reduce carbon emissions. The International Energy Agency calls solar the new "King of Electricity" and predicts it will be the fastest-growing energy source in the coming decades.

The Invesco Solar ETF tracks the MAC Global Solar Energy Index, offering investors focused exposure to the solar energy ecosystem. This includes companies involved in manufacturing, installation, and supportive technologies related to solar energy. As a result, it's an ideal choice for investors who are optimistic about solar power. Managed by Invesco, this ETF provides a diversified way for investors to access the solar sector without the need to select individual stocks.

TAN offers exposure to approximately 38 holdings across the solar value chain, spanning manufacturing, installation, project development, and financing. This comprehensive approach provides diversification within the solar sector, with both U.S. and international exposure, including companies from China, Israel, Taiwan, and Spain.

Investment Strategy📊

Adding TAN to your ETF portfolio requires careful consideration of your investment goals and risk capacity. Here are several strategies for implementation:

• 🛰️Core-Satellite Approach: One effective strategy is using TAN as a satellite position around a core of broad-market ETFs. Allocating 5-10% of your portfolio to TAN can provide enhanced exposure to the renewable energy transition while maintaining overall portfolio stability through your core holdings.

• 🧩Thematic Overlay: Investors confident in the future of renewable energy may want to include TAN in a broader thematic investment strategy. By combining TAN with other clean energy, infrastructure, or technology ETFs, investors can create a well-rounded portfolio that takes advantage of long-term sustainability trends.

• 🌈Sector Diversification: For investors seeking to diversify away from traditional energy exposure, TAN offers an opportunity to rebalance fossil fuel investments toward renewable alternatives. This can reduce portfolio correlation to oil and gas prices while introducing exposure to different growth drivers.

• 📅Dollar-Cost Averaging: Given the volatility in the solar sector, implementing a dollar-cost averaging strategy when building a position in TAN can help mitigate the impact of market timing and improve overall returns over time.

TAN at a glance

ETF Issuer: Invesco

Inception: 2008-04-15

Asset Class: Equity

Underlying Index: MAC Global Solar Energy Index

Geographical Focus: Global

Expense Ratio: 0.67% (as of last data point)

Dividend Yield: 0.47% (as of last data point)

Distribution Frequency: Annual

Historical Performance

The Invesco Solar ETF has demonstrated the potential rewards and risks of specialised sector investing. As of May 2025, TAN has shown considerable volatility in recent years:

• Year-to-date (2025): ~ -8%

• 1-year return: ~ -32%

• 3-year average return: ~ -26%

• 5-year average return: ~ 4%

These figures reflect the cyclical nature of the solar industry and the necessity of a long-term investment approach. After a period of exceptional growth earlier in the decade, solar stocks have experienced notable pullbacks due to factors like interest rate changes, policy shifts, and supply chain disruptions.

Despite recent challenges, the long-term drivers for solar energy adoption remain strong, presenting opportunities for patient investors.

ETF Radar View

The radar chart below shows the general characteristics of the ETF:

Top 3 Reasons to Invest

1. Exposure to the Energy Transition: Solar power is projected to be one of the fastest-growing energy sources globally, with Bloomberg New Energy Finance forecasting $4.2 trillion in solar spending through 2050. TAN provides direct exposure to companies positioned to benefit from this massive shift in energy infrastructure.

2. Cost-Competitiveness of Solar: Solar has become the cheapest new utility-scale electricity capacity source in many markets worldwide. This economic advantage, resulting from an 85% reduction in solar costs since 2010, creates a powerful long-term growth driver independent of policy support.

3. Policy Momentum: Despite some short-term policy uncertainty, the global momentum behind renewable energy remains strong. International commitments to combat climate change and domestic initiatives to promote clean energy continue to create supportive conditions for solar industry growth.

Top 3 Reasons Not to Invest

1. High Volatility: TAN has historically demonstrated significant price volatility, with large swings in both directions. The ETF's concentrated focus on a single industry subsector magnifies positive and negative movements, making it potentially unsuitable for risk-averse investors.

2. Political and Regulatory Risk: Solar industry growth remains partially dependent on government policies and incentives, which can change with political winds. Regulatory uncertainty can create unpredictable headwinds for companies in the ETF's portfolio.

3. Competitive Industry Pressures: The solar industry faces intense competition, margin pressures, and rapid technological change. Companies must continuously innovate and reduce costs to maintain competitiveness, creating challenging business conditions that can impact profitability and stock performance.

🌞Energising Your Investment Strategy with TAN

The Invesco Solar ETF offers investors a specialised tool to gain exposure to the growing solar energy sector. While recent performance has been challenging, the fundamental case for solar energy's long-term growth remains compelling. For investors who believe in the future of renewable energy and are willing to accept higher volatility, TAN can serve as a strategic component of a diversified ETF portfolio.

As with any specialised sector investment, position sizing and time horizon are crucial considerations. TAN is best suited for investors with a long-term outlook who can tolerate periodic significant drawdowns in pursuit of potential growth as the global energy transition unfolds.

We encourage readers of ETF UNO to evaluate how TAN aligns with their investment objectives, risk tolerance, and overall portfolio allocations. As always, we are here to assist you in navigating the evolving ETF landscape and in building portfolios that reflect your financial goals and values.

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DISCLAIMER: This article is for informational purposes only and should not be considered as investment advice. Always conduct your own research and consult with a financial advisor before making investment decisions.