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Comment by conjectures | Hacker News Reader

This. Suppose the goal is to buy and hold some index for your pension in 30 years time. It's hard for to imagine that fossil fuels are going to grow faster than the other index components. So I'd rather cut them out.

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But this wouldn't really be a return-maximizing strategy, would it? I wouldn't expect to hold the same stocks for the entire 30 years, rather I would be constantly looking for medium-term gains and then trying to lock them in once I think they've peaked. I.e., maybe I think fossil fuels are going to continue growing for at least a 5-year time frame, and then maybe around them, I would re-evaluate whether that's still true. In other words, the return-maximizing strategy would seem to be to treat them like any other investment.

There's truth to what you're saying; assuming one knows where relative medium term peaks and troughs are in multiple asset classes. That's a whale of an assumption. As is the assumption that fossil fuels are going to be higher growth rate over the medium term. Your strategy also requires attention and likely incurs more transaction costs if executing it yourself.

I thought I would do a ballpark check. Random first index of oil & gas I found was FTSE 350 Oil & Gas. Start 2010 value: ~7914. Start 2020: ~8253. Return: 1.043. General FTSE350 at the start of 2010: 2718. Start 2020: 4311. Return: 1.59. So we'd have done better buying a fossil fuel divested index 10 years ago. I see no reason to think this trend will reverse.

The fundamentals to me are that fossil fuels are likely only see more regulation, divestment and less importance to new technologies. While the upside wildcards in energy are most likely not in fossil fuels.

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