Exchange-traded funds (ETFs) have given retail investors access to corners of the market that were once difficult to penetrate, such as energy. Now, ETFs can give every investor access to energy issues to power their portfolios, but what are some of the top plays out there right now?
“An ETF explosion has taken over the financial market as exchange-traded funds enjoy the lion’s share of investment dollars globally—even as investors continue flocking to passive funds and shunning actively-managed mutual funds,” an OilPrice.com article explained. “The sheer growth numbers have industry punters licking their chops. From just a handful of offerings a couple of decades ago, we’re now bombarded with a cornucopia of everything ETF: 136 providers in the United States now offer 2,062 ETFs to investors backed by an impressive $5 trillion in assets under management (AUM).”
For broad market exposure to energy via an ETF wrapper, investors can look at the Energy Select Sector SPDR Fund (XLE ). XLE seeks to provide investment results that correspond generally to the price and yield performance of publicly traded equity securities of companies in the Energy Select Sector Index, which includes securities of companies from the following industries: oil, gas and consumable fuels; and energy equipment and services.
Here are a couple more options:
- First Trust NASDAQ Clean Edge Green Energy Index Fund (QCLN ): seeks investment results that correspond generally to the price and yield (before the fund’s fees and expenses) of an equity index called the NASDAQ® Clean Edge® Green Energy Index. The index is designed to track the performance of small, mid and large capitalization clean energy companies that are publicly traded in the United States.
- VanEck Vectors Low Carbon Energy ETF (SMOG): seeks to replicate as closely as possible, before fees and expenses, the price and yield performance of the Ardour Global Index. “Low carbon energy companies” refers to companies primarily engaged in alternative energy, including renewable energy, alternative fuels and related enabling technologies (such as advanced batteries).
Per the OilPrice article, QCLN “is an ETF managed by First Trust Advisors L.P. The fund invests in growth and value stocks of energy, oil, gas and consumable fuel companies that directly promote environmental responsibility.”
“QCLN has managed a total return (including dividends) of 207.5% over the past 10 years,” the report added. “That might not compare well with the S&P 500’s total return of 245.2% but still handily beats the -16.3% return by XLE over the timeframe.”
Additionally, SMOG “invests in stocks of companies operating across utilities, hydroelectric power generation, biofuels, geothermal, independent power and renewable electricity producers.”