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While 2022 hasn’t been good for the stock market as a whole, the energy section has been very strong. Oil prices are at an all-time high, partially due to the ban on Russian oil that was imposed earlier in the year.
One of the easiest and most convenient ways to invest in the energy sector is through an exchange-traded fund. With an ETF, and investor can own a share in a portfolio of stocks that are involved in the energy industry in some capacity.
Energy ETFs are generally not the best option for long-term buy-and-hold investors (see our list of the best ETFs for long-term growth). But with gas prices, and inflation in general, rising quickly, more investors have been turning to energy stocks and ETFs as a short-term solution.
In this article, we’ll look at some of the best energy ETFs available. If you want to analyze and evaluate stocks or ETFs, we highly recommend StockRover. With the help of StockRover, it’s easy to compare specific stocks or ETFs side-by-side. You can also create your own portfolios, run future simulations, and much more.
This article includes a chart from StockRover that shows the performance of each of these ETFs over the past five years.
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When you’re ready to buy an energy ETF, you can use an app like Public.com or Webull to place commission-free trades. You can even buy fractional shares if you don’t have enough money for a full share.
The purpose of this article is to highlight some ETFs that may be a good fit if you’re looking to invest in the energy sector. This is not investment advice and it’s possible to lose money with these ETFs. If you have questions about your own situation, be sure to seek personalized help from a financial professional.
What is an Energy ETF?
Energy ETFs invest in the stocks of oil and natural gas companies, and to a lesser extent, alternative energy companies. Most of the ETFs track a specific index. Some include only large-cap stocks while others may also include medium and small-cap companies. Some focus specifically on clean energy r renewable energy.
The value of energy stocks is greatly dependent on the price of oil and natural gas. When prices are going up, these stocks and ETFs generally do very well. Unlike a mutual fund, an ETF can be traded any time the market is open, just like an individual stock.
The Best Energy ETFs
Here are some of the top energy ETFs available. You can also use StockRover to find and analyze other ETFs that may interest you.
All of the stats for the funds in this article are from VettaFi and are accurate as of the day of publication, June 17th, 2022.
Related: How to Get Free Stocks
1. Energy Select Sector SPDR Fund (XLE)
XLE, one of the most popular ways to invest in energy, tracks the energy sector of the S&P 500, which means it features large-cap U.S. stocks. Top holdings include names like Exxon Mobil, Chevron, Marathon, Valero, Phillips 66, and others.
Investors will appreciate the very low expense ratio (0.10%) and solid dividend yield. However, it’s important to be aware that this is not the most diverse fund. The top two holdings (Exxon Mobil and Chevron) currently account for more than 40% of the portfolio.
Expense Ratio: 0.10%
Annual Dividend Yield: 3.75%
1 Year Return: 45.44%
3 Year Return: 52.09%
5 Year Return: 50.70%
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2. Vanguard Energy ETF (VDE)
VDE is another excellent option for fee-conscious investors, as it offers the same 0.10% expense ratio as XLE. Also like XLE, VDE offers attractive dividends.
This fund tracks the MSCI US Investable Market Energy 25/50 Index, which includes large, medium, and small-cap U.S. companies within the energy sector. Exxon Mobil and Chevron are the two largest holdings of VDE, but they make up a slightly smaller percentage of the overall portfolio as compared to XLE.
Expense Ratio: 0.10%
Annual Dividend Yield: 3.52%
1 Year Return: 43.51%
3 Year Return: 51.85%
5 Year Return: 46.46%
3. iShares U.S. Oil & Gas Exploration & Production ETF (IEO)
IEO tracks the Dow Jones U.S. Select Oil Exploration & Production Index. The expense ratio of this fund (0.42%) is significantly higher than XLE and VDE, but it does offer slightly better diversification with the top two holdings (ConocoPhillips and EOG Resources, Inc) currently accounting for about 27% of the portfolio.
Expense Ratio: 0.42%
Annual Dividend Yield: 1.96%
1 Year Return: 53.92%
3 Year Return: 82.89%
5 Year Return: 81.56%
4. Invesco Dynamic Energy Exploration & Production ETF (PXE)
PXE tracks the Dynamic Energy Exploration & Production Intellidex Index and currently includes about 30 holdings, with none of the current holdings account for more than 5% of the portfolio.
The expense ratio is comparatively high at 0.63%. This fund was designed to outperform market-cap-weighted benchmarks, but some investors will prefer funds with lower expense ratios.
Expense Ratio: 0.63%
Annual Dividend Yield: 1.69%
1 Year Return: 65.16%
3 Year Return: 101.97%
5 Year Return: 77.72%
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5. Fidelity MSCI Energy Index (FENY)
With an impressively-low expense ratio (0.08%), FENY is an attractive option for those looking for a simple way to invest in energy. The dividend payout is also solid.
FENY tracks the MSCI USA IMI Energy 25/50 Index, which includes many of the world’s largest oil producers. The portfolio includes about 80 different companies, including some small-cap stocks. As a result, it provides better diversification than some other energy ETFs. However, Exxon Mobil and Chevron account for about 37% of the portfolio.
Expense Ratio: 0.08%
Annual Dividend Yield: 3.30%
1 Year Return: 43.54%
3 Year Return: 50.49%
5 Year Return: 45.01%
6. Global X MLP & Energy Infrastructure ETF (MLPX)
MLPX tracks the Stuttgart Solactive MLP & Energy Infrastructure. It currently includes about 25-30 holdings, with no individual stock accounting for more than 10% of the portfolio of the fund.
With fewer than 30 holdings, MLPX is not the most diversified energy ETF, but it does offer an attractive dividend yield of more than 5%. The expense ratio (0.45%) is on the higher side, but not as high as some others on this list.
Expense Ratio: 0.45%
Annual Dividend Yield: 5.54%
1 Year Return: 5.40%
3 Year Return: 27.43%
5 Year Return: 35.21%
7. United States 12 Month Oil Fund LP (USL)
USL is a unique fund because it invests in crude oil futures for the next 12 months. There are no stocks in the portfolio, just an investment in sweet light crude oil futures. It could potentially serve as an inflation hedge, but the value of this ETF is completely dependent on crude oil prices. The expense ratio is also quite high at 0.88%.
Expense Ratio: 0.88%
Annual Dividend Yield: N/A
1 Year Return: 72.62%
3 Year Return: 116.39%
5 Year Return: 165.38%
Final Thoughts on the Best Energy ETFs
Energy ETFs are not for everyone and they’re probably not the best option for buy-and-hold investors. But in some situations, they perform very well and may serve as an inflation hedge. With prices oil and natural gas prices soaring, 2022 has been a good year so far for energy stocks and ETFs. As a result, more investors have been looking toward the best energy ETFs, like the ones covered in this article.