8 best energy ETFs to buy for Q4 2023
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Energy is what makes the world function, both for consumers and businesses. As a result, it has always been a popular sector for investors. Nowadays, the energy sector is extremely varied, with solutions ranging from traditional fossil fuels to greener, renewable options.
With this in mind, our analysts have selected a diverse list of the top energy ETFs which can provide exposure to a particular area of the energy thematic. Check them out in this handy guide.
What are the top energy ETFs to buy?
Copy link to sectionOur team of financial analysts have been digging into the energy sphere, searching for the best energy ETFs and finding out what they have to offer for investors. You can find their final selection below.
| # | ETF ticker | ETF name | Where to Trade |
|---|---|---|---|
| 1 | XLE | Energy Select Sector SPDR Fund | Buy XLE 77% of retail CFD accounts lose money. |
| 2 | TAN | Invesco Solar ETF | Buy TAN 77% of retail CFD accounts lose money. |
| 3 | QCLN | First Trust NASDAQ Clean Edge Green Energy Idx Fd ETF | Buy QCLN 77% of retail CFD accounts lose money. |
| 4 | XOP | SPDR S&P Oil & Gas Exploration & Production ETF | Buy XOP 77% of retail CFD accounts lose money. |
| 5 | VDE | Vanguard Energy Index Fund ETF | Buy VDE 77% of retail CFD accounts lose money. |
| 6 | IXC | iShares Global Energy ETF | Buy IXC 77% of retail CFD accounts lose money. |
| 7 | OHIV | VanEck Oil Services UCITS ETF | Buy OHIV 77% of retail CFD accounts lose money. |
| 8 | INRG | iShares Global Clean Energy UCITS ETF | Buy INRG 77% of retail CFD accounts lose money. |
Now you know our selection of the best energy ETFs, read the section below for an overview of what they have to offer for investors.
1. Energy Select Sector SPDR Fund (NYSEARCA: XLE)
Copy link to sectionThe Energy Select Sector SPDR Fund is designed to track the performance of the Energy Select Sector Index. This index was created to provide an ‘effective representation of the energy sector of the S&P 500 Index.’
XLE holds some of the largest American energy companies, and its top three holdings are Exxon Mobil Corporation, Chevron Corporation and ConocoPhillips: some of the world’s leading producers of crude oil and natural gas.
The reason this ETF is on our list is because of its sheer scale. With over $26B in assets, XLE is the largest energy ETF on the planet. While it hasn’t been the best performing ETF over the past 5 years on this list, if you are looking for maximum exposure to America’s largest energy companies, XLE could be the right ETF for your portfolio.
77% of retail CFD accounts lose money.
2. Invesco Solar ETF (NYSEARCA: TAN)
Copy link to sectionTaking a slightly different and greener route, the Invesco Solar ETF aims to track the performance of the MAC Global Solar Energy Index that was conceived in 2008, making it the world’s first solar index for the ETF industry.
The top three holdings in TAN are Enphase Energy Inc., SolarEdge Technologies Inc, and First Solar Inc. As a result, this ETF is a strong option for those looking to speculate on the future value of the rapidly growing solar power industry.
In fact, this growth potential is the key reason TAN is on this list. The management team behind the MAC Global Solar Energy Index has been keen to endorse projections by Bloomberg New Energy Finance (BNEF). These figures indicate there will be ‘$3.4 trillion of solar spending through 2040’ and that solar will represent ‘35% of all new global electricity generation installs’ and will generate ‘25% of all electricity globally by 2050.’
77% of retail CFD accounts lose money.
3. First Trust NASDAQ Clean Edge Green Energy Idx Fd ETF (NASDAQ: QCLN)
Copy link to sectionQCLN is designed to track the performance of public clean energy companies in the United States. This includes companies involved in the manufacturing, development, distribution and installation of innovative clean-energy technologies including, electric vehicle (EV) batteries, wind power, fuel cells, advanced batteries and solar photovoltaics.
The top three holdings in this ETF are Tesla, Enphase Energy Inc., and Albemarle Corp. Thanks to its combination of a diverse range of companies within the clean energy sector, from vehicle manufacturers and wind farm constructors to fine chemical manufacturers and solar panel installers, QCLN may be ideal for an ethical energy investor who wants exposure to everything clean, green and American.
Having performed well for the last five years, and with western governments aggressively redirecting subsidies towards new green enterprises and technologies, QCLN could be poised to experience further growth, and that is why it is on this list.
77% of retail CFD accounts lose money.
4. SPDR S&P Oil & Gas Exploration & Production ETF (NYSEARCA: XOP)
Copy link to sectionTaking a step back in time, listed in June 2006, XOP is an ETF that aims to provide investors results that broadly correspond with the total return performance of the S&P Oil & Gas Exploration & Production Select Industry.
XOP is an extremely varied ETF and doesn’t have a single company constituting over 5% of its net assets. Nonetheless, its top three holdings are Diamondback Energy Inc., SM Energy Co., and Exxon Mobil Corp.
XOP is on our list because it offers exposure to up-and-coming oil and gas explorers rather than just existing powerhouse producers. As a result, there is a lot more headroom for potential growth. If oil and gas prices rise in the coming years – as some top analysts project them to – the XOP ETF could be a strong investment.
77% of retail CFD accounts lose money.
5. Vanguard Energy Index Fund ETF (NYSEARCA: VDE)
Copy link to sectionVanguard is one of the biggest energy ETFs in the world. It is passively managed and aims to track the performance of a benchmark index that measures the investment return of stocks in the energy sector. Primarily, its basket of companies features oil, natural gas, and coal players.
The top ten holdings under the VDE umbrella make up around 70% of the company, and the top three are Exxon Mobil Corp., Chevron Corp., and ConocoPhillips.
VDE is an ETF that has performed well recently, and its focus on larger holdings of individual companies gives it a degree of stability and security that has secured it a spot on this list.
77% of retail CFD accounts lose money.
6. iShares Global Energy ETF (IXC)
Copy link to sectionThe iShares Global Energy ETF is one of the largest clean energy ETF available today. The fund tracks the S&P Global 1200 Energy index, giving investors diversified exposure to over 60 global companies involved in oil, natural gas, consumable fuels, and energy equipment services.
The exchange traded funds’ top holdings comprise over half the fund and include integrated giants ExxonMobil, Chevron, Shell, TotalEnergies and Schlumberger.
IXC mimics the performance of companies across the traditional energy supply chain. With $2.3 billion in assets under management and a 0.43% expense ratio, this ETF provides a direct way to invest in the global energy sector.
77% of retail CFD accounts lose money.
7. VanEck Oil Services UCITS ETF (OHIV)
Copy link to sectionNext up on our list of best energy ETFs to buy in November 2023 is the VanEck Oil Services UCITS ETF. OIHV tracks the MVIS US Listed Oil Services 25 index, which is focused on around 25 companies providing equipment, services, and infrastructure to the oil and gas industry.
This includes drilling, exploration, geophysical services, pumping, pipelines, and refining. OIHV’s top holdings are concentrated in just a few firms like Halliburton, Schlumberger, Baker Hughes and Transocean.
With a 0.35% expense ratio, this energy ETF provides concentrated exposure to services supporting the traditional energy sector. It offers leveraged performance but higher risk than diversified energy ETFs.
77% of retail CFD accounts lose money.
8. iShares Global Clean Energy UCITS ETF (INRG)
Copy link to sectionThe final spot on our best energy ETFs list goes to another fund from iShares. This time, it is the iShares Global Clean Energy UCITS ETF. INRG tracks the performance of its benchmark index, the S&P Global Clean Energy Index.
The ETF is comprised of companies generating energy through renewable resources, including wind, solar, hydroelectric, geothermal, biofuels and hydrogen fuel cells. INRG provides exposure to over 100 leading clean energy stocks across both developed and emerging markets.
Its top holdings comprise just 20% of the fund, providing diversity. With $5.8 billion in assets under management and a 0.65% expense ratio, INRG offers a lower risk way to invest in the fast-growing global transition toward renewable energy.
77% of retail CFD accounts lose money.
Where to buy the best energy ETFs
Copy link to sectionPurchasing an ETF can be done in exactly the same way one would purchase a stock. Simply sign up to an online stockbroker, deposit funds, and start investing. To help you choose the best ETF platforms, we have listed some of the best options below along with a quick explanation of why they are such strong candidates.
77% of retail CFD accounts lose money.
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What is an energy ETF?
Copy link to sectionIt is an exchange-traded fund (ETF) that features companies involved in the energy sector. This can include companies involved in the production of natural gas, oil, wind power, solar power, and alternative energy. Moreover, in some cases, an energy ETF will include utility companies such as nuclear power operators, solar panel producers and hydrogen power players.
For the avoidance of doubt, an ETF is a type of fund, and it tends to be cheaper than other fund types. ETFs trade on stock exchanges just like normal stocks, meaning they can be bought and sold throughout the trading day.
However, unlike a stock, ETFs offer exposure to a whole basket of companies in a certain industry. This means investors can diversify their investment and tone down their portfolio’s risk profile rather than betting on the success of a single company. Essentially, ETFs provide an investor with exposure to the performance of an entire industry rather than just one company.
Are energy ETFs a good investment?
Copy link to sectionEnergy is regularly one of the top-performing ETF sectors each year and its integral role for consumers and businesses means it will always be a worthy investment. Annual global energy investment currently hovers around the $2T mark.
Another positive is that Energy ETFs have a specific key benefit over energy stocks when it comes to diversification without compromising on trading flexibility.
Because of the multifaceted nature of the energy sector, energy ETFs are some of the most diversified funds around which leaves them well equipped to cope with the strains of market volatility and bearish conditions. For example, while the nuclear power company in your green energy ETF might be struggling due to a depressed uranium spot price, the solar panel manufacturer that is also part of the fund may compensate for these losses.
Whether or not an energy ETF is a good investment really depends on what kind of ETF you go for. If you go for a green energy ETF, the increased pressure by environmentalists on national governments to focus on the environmental, social and governance (ESG) narrative could result in a green new deal and meaningful growth.
Similarly, if you go for a more conventional coal & gas ETF, a future tail-off in production because of a worldwide shift towards renewable energy could lead some companies to benefit from increased prices.
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