Table of Contents

Energy ETF: What It Is and How To Invest

By

澳洲幸运5开奖号码历史查询:James Chen

Updated November 30, 2023

Reviewed by

Cierra Murry

Part of the Series

Commodity ETF Guide

Commodity ETF: Meaning, Overview, and Guide

Metals and Mining

Energy

Agriculture

What Is an Energy ETF?

An energy ETF is an exchange-traded fund that exposes investors to the energy sector. Energy ETFs track a broad sector index, sub-sector, 澳洲幸运5开奖号码历史查询:commodity, or other assets by investing in oil, gas, and alternative energy companiesꦕ.

Energy ETFs allow investors to diversify their risk by giving them access to a broad range of investments without choosing individual companies. Like stocks, energy ETF shares can be 𝄹purchased on an exchange.

Key Takeaways

An energy ETF is an exchange-traded fund that exposes investors to the energy sector.
They track a broad sector index, sub-sector, commodity, or asset.
Energy ETFs invest in oil, gas, and alternative energy companies.
Energy ETFs allow investors to diversify their portfolios and reduce risk.

Understanding Energy ETFs

澳洲幸运5开奖号码历史查询:Exchange-traded funds were introduced in the 1990s and offer individuals an opportunity to diversify their 澳洲幸运5开奖号码历史查询:portfolios. Like mutual funds, ETFs expose investors to a basket of securities that track an underlying index, commodity, sub-sector, or asset. ETFs trade on exchanges, which means shares are available for purchase through a brokerage account. Like 澳洲幸运5开奖号码历史查询:mutual funds, they can be 澳洲幸运5开奖号码历史查询:actively and passively managed.

The energy sector represents a significant part of the global economy and is evident in the broad market averages like the 澳洲幸运5开奖号码历史查询:S&P 500. Energy ETFs are baskets of securities of oil, gas, and 澳洲幸运5开奖号码历史查询:alternative energy companies, including those involved in the exploration, production, distribution, transportღation, and manufacturing of energy🐼 and related products.

Specialized energy ETFs cover a wide range of business types, regions, and risk profiles. There are choices for both 澳洲幸运5开奖号码历史查询:conservative and 澳洲幸运5开奖号码历史查询:aggressive investors. The sector encompasses a highly complex and sophisticated network of companies involved in the production and distribution of the energy needed to power everyday life and routine business.

1990

The year the world's first ETF, Toronto 35 Index Participation Units, was launched, which traded on the 澳洲幸运5开奖号码历史查询:Toronto Stock Exchange (TSX). The first ETF was introduced in the United States in 1993.

Investing in Energy ETFs

By choosing ETFs, investors can diversify their portfolios and reduce risks associated with investing in the energy sector, such as 澳洲幸运5开奖号码历史查询:market risk, commodity price risk, and geopolitical risk. ETFs offer the option to choose clean energy ETFs while avoiding 澳洲幸运5开奖号码历史查询:traditional energy companies that deal with oil, gas, and coal. Investors commonly use a 澳洲幸运5开奖号码历史查询:brokerage account to begin trading.

Important

As of November 2023, 55 energy ETFs traded on the U.S. markets with a total of $82.2 billion in 澳洲幸运5开奖号码历史查询:assets under management (AUM), according to ETF.com. The average 澳洲幸运5开奖号码历史查询:expense ratio for these ETFs was 0.67%.

The Energy Select Sector SPDR Fund (XLE) is the largest energy ETF and is managed by State Street Global Advisors. As of November 2023, the ETF had $37.7 billion in AUM and a gross expense ratio of 0.10%. Its goal is to provide investors with an "effective representation of the energy sector of the S&P 500 Index." Other populꦏar energy ETFs available on the market as of October 2023 include:

ETF Name	Ticker Symbol	Assets Under Management	Expense Ratio	Benchmark Index
iShares Global Energy ETF	IXC	$3 billion	0.44%	S&P Global 1200 Energy Sector Index
Vanguard Energy ETF	VDE	$9.8 billion	0.10%	Spliced US IMI Energy 25/50
Fidelity MSCI Energy ETF	FENY	$1.6 billion	0.084%	MSCI US IMI Energy 25/50
Global X MSCI China Energy ETF	CHIE	$5.4 million	0.66%	MSCI China Energy IMI Plus 10/50 Index
Invesco Solar ETF	TAN	$2.4 billion	0.69%	MAC Global Solar Energy Index

What Are the Risks of Investing in ETFs?

ETFs provide diversification but there are risks to consider. Any specialized sector-based ETF like ones that track energy stocks can add 澳洲幸运5开奖号码历史查询:volatility to a portfolio, so it's important to do your research before you make any investment decisions. Reviewing the 澳洲幸运5开奖号码历史查询:prospectus is a prudent move for any inve𓆉stor🎃, especially when considering volatile commodities like energy.

Do ETFs Pay Dividends?

Dividends are treated in two ways by ETFs. Some reinvest the dividends paid out by companies in their portfolios back into the funds. Others pay them out directly to shareholders. In this case, payouts are considered dividends from the ETF—not the companies that issue them. As such, they're disbursed from the fund's total assets.

What Are Renewable Energy ETFs?

Companies that produce energy from solar, wind, and other renewable sources are considered renewable energy companies. ETFs such as the iShares Global Clean Energy ETF () invest in these companies.

The Bottom Line

澳洲幸运5开奖号码历史查询:An energy ETF is an exchange-traded fund that exposes investors to the energy sector. ETFs track a broad sector index, sub-sector, commodity, or asset. Inves🍨tors wꦛho choose energy ETFs are exposed to oil, gas, renewable, and alternative energy companies.

Article Sources

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