Alternative energy is a hot topic these days. Rising oil prices, depleting coal, oil, and natural gas reserves, and continuous use of renewable resources threaten the environment. Many environmentalists, business leaders, and politicians are encouraging the use of alternative energy resources.

The alternative energy industry is growing leaps and bounds as individuals, companies, and governments increase their use of power generated by wind, soil, and other renewable resources.

According to International Energy Agency (IEA), by 2026, global renewable electricity capacity will rise more than 60% to 48,00 gigawatts, equal to the current total global power of fossil fuels and nuclear combined. Thus, investors are shifting their focus to the alternative energy sector because of its high potential to generate long-time revenue growth and profits.

SunPower Corp. (SPWR), Enphase Energy Inc. (ENPH), and First Solar Inc. (FSLR) are well-known alternative energy companies in the sector.

Alternative energy mutual funds provide investors with professionally managed exposure to many companies engaged in a wide range of clean energy-related businesses. In addition to energy, some of these funds also invest in biotech.

These mutual funds may be an alternative for investors looking to invest in this industry.

Four top alternative energy mutual funds to buy

Look at the top four energy mutual funds of 2022: GAAEX, NALFX, NEXTX, and FSLEX, ranked by trailing total return (TTL).

The first two funds in our list, GAAEX, and NALFX are compared to the benchmark world small-cap and mid-cap stocks category and the Morningstar Global Markets Small-Mid Cap index.

The overall category's one-year trailing total return was 8.7%, while the index's total return was 11.6%. Over the same period, GAAEX outperformed the category while underperforming the index, whereas NALFX underperformed both the type and the index.

The benchmark midcap growth class and the Morningstar U.S.U.S. Mid Cap Broad Growth Index may use as comparisons for the third and fourth funds on our list, NEXTX, and FSLEX.

The performance data of the energy funds discussed above and the following figures are as of 2022.

1. Guinness Atkinson Alternative Energy Fund (GAAEX)

• One-year Trailing Return: 10.2%
• The ratio of Expenses: 1.98%
• Trailing-Twelve-Month (TTM) Dividends yield: 0%
• AUM: $32.4 million
• Date of Inception: March 31, 2006.

Jonathan Waghorn and Will Riley manage the operation of the GAAEX fund. GAAEX invests at least 80% of its total assets in equity securities of foreign and domestic alternative energy companies.

The fund targets businesses with minimum market size of $500 million even though it invests across the market capitalization spectrum.

More than one-third of invested assets incorporate technology firms, followed by utilities and industrials.

United States stocks make up around half of the fund, while foreign reserves make up slightly more of the portfolio.

First Solar Inc. (FSLR), a manufacturer of solar panels, equipment, and infrastructure, Class A shares of Ameresco Inc. (AMRC), a provider of renewable energy solutions, and Aptiv PLC (APTV), an American auto components manufacturer with Irish headquarters, are among GAAEX's top holdings.

1. New Alternative Fund Class A (NALFX)

• One-year Trailing Return: 2.5%
• The ratio of Expenses: 0.96%
• Trailing-Twelve-Month (TTM) Dividends yield: 4.88%
• AUM: $445.0 million
• Date of Inception: September 3, 1982.

Murray D. Rosenblith and David J. Schoenwald NALFX.

The fund makes stock investments in companies that create goods and operate facilities that protect the environment and replace the usage of fossil fuels. NALFX concentrates on green energy.

Over 60% of the fund's holdings are non-American stocks, and only about a third are American-based corporations. The portfolio uses a mix of value and growth stocks and prefers midcap firms.

EDP Renováveis S.A. (EDPR.LS), a Spanish developer and operator of renewable power facilities, Clearway Energy Inc. (CWEN), a provider of wind, solar, and other renewable energy, and NextEra Energy Partners L.P. (NEP), a provider of renewable energy, are among NALFX's top holdings.

1. Shelton Green Alpha Fund (NEXTX)

• One-year Trailing Return: -0.7%
• The ratio of Expenses: 1.28%
• Trailing-Twelve-Month (TTM) Dividends yield: 0%
• AUM: $328.0 million
• Date of Inception: March 12, 2013.

Jeremy Deems and Garvin Jabusch manage NEXTX.

By purchasing shares of companies involved in the green economy, the fund seeks to increase its value over the long term.

The fund's investment sub-advisor, Green Alpha Advisors, chooses the stocks in which NEXTX predominantly invests. Green Alpha mainly focuses on companies with above-average growth potential that are reasonably valued.

The fund invests more than two-thirds of the assets in American companies, favoring midcap growth positions.

NEXTX has allocated over two-thirds of its assets toward U.S.U.S. stocks and tends toward midcap growth positions.

The top holdings of NEXTX are ADRs of Vestas Wind Systems A/S (VWDRY), a Danish manufacturer of wind turbines and related products, and Moderna Inc. (MRNA), a pharmaceutical and biotechnology company, and ADRs of JinkoSolar Holding Co. Ltd. (JKS), a Chinese solar panel manufacturer.

1. Fidelity Select Environment and Alternative Energy Portfolio: FSLEX

• One-year Trailing Return: 14.82%
• The ratio of Expenses: 0.85%
• Trailing-Twelve-Month (TTM) Dividends yield: 0.33%
• AUM: $700.500 million
• Date of Inception: June 29, 1989.

Asher Anolic and Julia Pei manage the fund. FSLEX aims to increase its value. FSLEX is a non-diversified fund that invests most of its assets in common stocks of companies. These companies are involved in primary business activities related to alternative and renewable energy, energy efficiency, pollution control, water infrastructure, waste and recycling technologies, or other environmental support services.

Compared to the category average of 1.04%, FSLEX has an annual expense ratio of 0.85%. In addition, the fund has a considerable interest in firms that provide alternative energy. The top holdings of FSLEX are Microsoft Corp, Tesla Inc., Linde PLC, and Danaher Corp.

Bottom line

These alternative mutual energy funds allow you to invest in clean energy at different levels. Before investing in these top alternative energy ETFs, you must check the fund's past performance. With proper financial planning, you can choose the best fund that suits your portfolio and help you achieve your investment goals. Choose the best alternative energy fund having high growth potential and is environmentally and socially responsible.