It's not easy being green: Funds, ETFs can flounder

— -- Q: Everyone wants to look 'green,' but is there a real way to support and invest in companies working on a sustainable economy?

A: The green boom reminds me of the dot-com boom earlier in the decade.

Just about every company is trying, and probably reaching a bit, to describe themselves as green or environmentally sound. During the dot-com boom, just adding ".com" to a company's name was sure to give the stock a pop. Luckily, the same kind of hysteria hasn't occurred with stocks that try to paint themselves green.

There's definitely investor interest in companies that are doing what they can to treat the environment well. But before we get too far, let me caution you to be very careful here. As you allude to your in your question, it's simple for companies, especially those that don't trade on a regulated stock exchange, to misrepresent their "greenness." Don't be sucked in by a green fraud.

With that said, there are several ways to invest in companies building a sustainable economy:

• Mutual funds that invest in green companies. There are a number of funds that look for companies trying to treat the planet with respect. One is the Forward Funds Sierra Club fund fsusx, which you can read more about here. It's not setting the world on fire.

There are other choices. You can search for mutual funds that fit your standards with USATODAY.com's Mutual Fund screener. Select Specialty and Misc Funds under Equity funds.

• Exchange-traded funds (ETFs) that track clean energy. ETFs are mutual fund-like investments that trade like stocks. They make it easy to invest in many companies in a line of business. A few green examples include the PowerShares Wilder Clean Energy Portfolio pbw, PowerShares Cleantech pzd, First Trust Nasdaq Clean Edge qcln and iShares S&P Global Clean Energy icln.

Just be aware of the risk. And don't invest in green energy thinking that you're helping the environment. If that's your goal, you're probably better off making donations to foundations that have the express purpose of propelling your environmental goals.

Also, just because a company is green doesn't mean it's going to help your portfolio. You can lose large amounts of your investment, even if you're investing in green companies. For example, the Sierra Club fund listed above is down about 50% this year, and while most of the ETFs are showing gains so far this year, they're down for the most recent 12 months.

Until there's more in-depth academic analysis of the value of green investments, consider it speculation, rather than a core piece of your portfolio.

Matt Krantz is a financial markets reporter at USA TODAY and author of Investing Online for Dummies. He answers a different reader question every weekday in his Ask Matt column at money.usatoday.com. To submit a question, e-mail Matt at mkrantz@usatoday.com. Click here to see previous Ask Matt columns. Follow Matt on Twitter at: twitter.com/mattkrantz