Tips for green investing in 2009

Then, be patient.

These environmentally friendly companies may not make big money for a long time if at all -- a fact of life in the start-up world made more intense by the recession.

That's because green products and services are often more expensive than their conventional counterparts, and during hard times, discretionary spending is usually the first to go. But to ignore their long-term potential is shortsighted, Kessel said.

Investments in alternative-energy companies, for example, probably won't pay off immediately, but they might in five to eight years, he said.

Another key factor is the incoming Obama administration.

As environmental degradation continues, he and other world leaders will be under immense pressure to stem the damage. The plans that his administration lays out are likely to dominate the direction of the green movement.

Conservation and renewables will get another push in the form of public-works projects built into Obama's stimulus package. China, a prolific polluter as well as a center for green tech, is also unveiling a stimulus package.

Throughout the economy, companies large and small are champing at the bit to advertise themselves as green -- and cash in on what many believe will be a revolution in energy, household products and other areas.

"The American consumer wants to be involved in it, and big companies are increasingly interested because they desperately need growth themselves," said Jack Robinson, founder and president of Winslow Green Growth. The mutual fund was down 61.5% last year after gaining 23.5% in 2007, its fifth straight year of positive gains.

Another environmentally minded fund, Portfolio 21, declined 36% in 2008, also after enjoying five years of positive returns.

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Think sub-sectors

The green sector is so new that it's hard to even figure out what companies belong in it. Does Toyota Motor Corp., which makes SUVs along with hybrid cars? Does Whole Foods Market Inc., which sells organic foods but operates a huge supermarket chain?

It may be easier to break the sector down by company type.

The first and perhaps most obvious is energy. There are people developing sustainable fuels for cars and pushing to increase the amount of solar or wind energy that powers homes and businesses. That also extends to companies developing power cables to deliver that energy to urban centers.