Energy ETFs offer an attractive opportunity to investors with a long term horizon since they represent a stable industry with a bright future. The demand for energy continues to rise steadily and this is particularly true of nations growing at a rapid pace. Along with this trend, the pressure on natural resources which are harnessed to provide energy and related services has also increased considerably. With the advantages of professional management and well diversified portfolios ETFs are the most viable route to invest in this sector.
Below is a list of the 3 most popular energy ETFs.
ishares Dow Jones US Energy (IYE)– tracks the performance and yield of the Dow Jones US Oil & Gas Index. This ETF has a below average expense ratio for its category of 0.47%. The largest holdings in this ETF are Exxon Mobil and Chevron.
SPDR S&P Oil & Gas Exploration and Production (XOP) – this ETF uses a passive management strategy to track the performance S&P Oil & Gas Exploration and Production Index. This ETF also has a below average expense ratio for its category of 0.36. Moreover this ETF has the highest correlation to the spot price of oil at nearly 92%.
Vanguard Energy ETF (VTE) – this ETF seeks to replicate the performance of the MSCIA US Investable Market Energy Index 25/50 index, which holds energy of companies of all market caps. This ETF has an extremely low expense ratio of 0.24 less than half the category average of 0.57%. This ETF has a low turnover of just 16% a year, meaning it holds on to its positions and does not generate unnecssary capital gains taxes.
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