While many energy ETFs will simply assign weights to each stock based on their relative size (e.g., the largest stocks account for the largest percentages of the fund’s assets), PXE does things a little differently. For one, its underlying index evaluates companies based on various criteria, including value, quality, earnings momentum and price momentum. It also “tiers” market capitalization groups, ultimately giving mid- and small-sized companies a chance to shine. Roughly 31% of PXE’s assets are allocated to small-cap stocks, and another 28% are in midsize firms, leaving about 40% to larger corporations.

  • Also, the expense ratio is a bit high at 0.41%, equivalent to $4.10 for every $1,000 invested.
  • They typically make their money by selling oil and gas to refiners, who turn them into products such as gasoline, diesel fuel and kerosene.
  • It holds these contracts all the way up to two weeks until expiration, before rolling them into the next month’s futures contract.
  • The top holdings of the first of these ETFs are futures contracts for Brent Crude oil, and the top holdings for the second and third are futures contracts for West Texas Intermediate sweet light crude oil.
  • If you’re less willing to handle volatility, or simply prefer to avoid fossil fuels because of their negative impact on the environment, you’ll likely be better off with other investments.
  • Passively managed funds hold a range of securities that, in the aggregate, approximates the full Index in terms of key risk factors and other characteristics.

A large percentage of the world depends upon oil to create energy, and all signs point to aggressive future demand. The United States produces over 35% of its energy through coal and oil, and the International Energy Association has projected increases in demand across the globe, particularly in Japan, Poland and Turkey. Despite the rise of renewable energy research, the demand for oil continues to grow. Experts predict that daily demand for oil will exceed over 100 million barrels worldwide.

The top 10 oil ETFs

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Is XLE The Best energy ETF?

By the narrowest of margins, the Energy Select Sector SPDR ETF (XLE) captures the #1 spot over the Vanguard Energy ETF (VDE) and the Fidelity MSCI Energy Index ETF (FENY), which lands at #4.

Not only will the sector need to meet that growing demand, but it must do so as production from legacy fields continues declining. In the IEA’s view, oil companies need to bridge a 35 million BPD gap in the coming years. For perspective, that’s more than the current production of the world’s top three producers — the U.S. Founded in 1993 by brothers Tom and David Gardner, us dollar to polish zloty exchange rate The Motley Fool helps millions of people attain financial freedom through our website, podcasts, books, newspaper column, radio show, and premium investing services. Tastyworks, Inc. (“tastyworks”) has entered into a Marketing Agreement with tastytrade (“Marketing Agent”) whereby tastyworks pays compensation to Marketing Agent to recommend tastyworks’ brokerage services.

Invesco BD Oil Fund provides exposure to light sweet crude oil , which is the most popular oil benchmark in the world. This ETF is designed for investors who want a cost-effective and convenient way to invest in commodity futures. The investments are of speculative nature which takes place in a highly volatile environment.

These firms seek out sources of oil and natural gas, then physically extract the hydrocarbons. They typically make their money by selling oil and gas to refiners, who turn them into products such as gasoline, diesel fuel and kerosene. The United States Brent Oil Fund LP ETF is an exchange-traded fund that seeks to track the daily price movements of Brent crude oil. BNO’s benchmark is the near-month futures contract traded on the ICE Futures Exchange. At the center of everything we do is a strong commitment to independent research and sharing its profitable discoveries with investors. This dedication to giving investors a trading advantage led to the creation of our proven Zacks Rank stock-rating system.

Vanguard Energy ETF

Share price returns are based on closing prices for the Fund and do not represent the returns an investor would receive if shares were traded at other times. Transparency and Liquidity – This fund invests in liquid futures contracts at publicly available prices determined by trading on regulated futures exchanges. Investors who simply want to add a little extra oil exposure to their portfolio, but not take any undue risks in doing so, should prefer the iShares U.S. Oil & Gas Exploration & Production ETF, as it has a bias toward larger and less-risky oil producers. The impact of the ETF’s small-cap bias can be seen in its performance by year.

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For example, rather than focusing on the long-term growth prospects of a particular company, they would take calculated risks on a stock with the potential of yielding a higher return. Inverse Oil ETF focuses on getting returns if the oil prices move in the opposite direction. For example, if the oil prices dropped by 7%, such would be the composition of the index that the returns would be approx. Because of this, most often than not, the inverse oil ETF is the best hedging mechanism among the available Oil ETF options. Pete Johnson is an experienced financial writer and content creator who specializes in equity research and derivatives.

Best Oil ETFs for 2022

The investment track record – You’ll also want to know the track record of the ETF. Has it outperformed the industry, or has it underperformed during a period of strength? The track record can give you some idea of what to expect from the ETF. But energy companies are volatile and may not show good long-term records. If you’re looking for other types of energy exposure, such as innovative green companies, you can find that, too.

Oil ETFs seek to replicate the price movement of an oil benchmark, such as the WTI or Brent crude. Many oil ETFs utilize futures contracts, so shareholders of swiss franc to hungarian forint exchange rate these ETFs do not take possession of the physical asset. Investors should keep in mind that the price of oil can significantly fluctuate in the short term.

best oil etf

Yet investing in USO can be a bit riskier as oil prices can change rapidly. USO holds U.S. crude futures, and the fund has plummeted as oil prices have fallen drastically. On Monday, front-month oil futures dropped below zero for the first time ever.

Crude Oil News

But the fund is unique in the way it assigns weight value to holdings. Instead of focusing on just large-cap stocks like many ETFs, PXE rates by market cap group. So, every holding has a chance to pull its weight rather than relying on large caps. As a result, FCG can be less risky but can also see lower returns in the short term. Keep reading to find the best oil ETFs for 2022 portfolio growth.

The existence of this Marketing Agreement should not be deemed as an endorsement or recommendation of Marketing Agent by tastyworks. Tastyworks and Marketing Agent are separate entities with their own products and services. Please read Characteristics and Risks of Standardized Options before deciding to invest in options. The bond market has struggled in 2022, but investors with a longer-term view should consider these bond ETFs to balance their portfolios.

NerdWallet does not and cannot guarantee the accuracy or applicability of any information in regard to your individual circumstances. Examples are hypothetical, and we encourage you to seek personalized advice from qualified professionals regarding specific investment issues. Our estimates are based on past market performance, and past performance is not a guarantee of future performance. Database as being mostly exposed to those respective commodities. The lower the average expense ratio for all U.S.-listed ETFs in a commodity, the higher the rank. In addition to price performance, the 3-month return assumes the reinvestment of all dividends during the last 3 months.

The upstream segment focuses on exploring for, drilling, and producing oil. The global economy consumed more than 99 million barrels of crude per day during 2018. An average price around $70 a barrel that year puts the global oil market at more than $2.5 trillion. To put that in perspective, the global economy spent more money on oil than it did on all other commodities, such as gold, iron ore, and coal, combined.

  • The equal weighting results in a portfolio that is slightly biased toward smaller companies in the services industry.
  • The ETF is heavily exposed to futures contracts that expire in one year, which reduces the short-term risks of contango.
  • Such a huge portfolio of companies at a surprisingly low expense ratio makes XLE one of the best ETFs to buy for 2022.
  • Follow this list to discover and track stocks in the oil and gas industry.
  • The fund has also performed better than all the other funds on our list, gaining 6.30% over the past three years.

While major oil businesses such as Exxon Mobil and Chevron make up a large portion of the fund’s portfolio, it also includes businesses focused on oil equipment and services, transportation, and storage. The investing information provided on this page is for educational purposes only. NerdWallet does not offer advisory or brokerage services, nor does it recommend or advise investors to buy or sell particular stocks, securities or other investments.

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We are compensated in exchange for placement of sponsored products and, services, or by you clicking on certain links posted on our site. Therefore, this compensation may impact how, where and in what order products appear within listing categories. Other factors, such as our own proprietary website rules and whether a product is offered in your area or at your self-selected credit score range can also impact how and where products appear on this site. While we strive to provide a wide range offers, Bankrate does not include information about every financial or credit product or service. The Vanguard Energy portfolio is also available as an Admiral’s Class mutual fund for major investors who are interested in investing at least $100,000 in exchange for lower fees. The Motley Fool owns shares of EOG Resources, ExxonMobil, and Halliburton.

best oil etf

This ETF intends to represent the energy sector of the Standard & Poor’s 500 index. It includes companies involved in exploration and production such as ExxonMobil and Chevron, as well as companies with exposure to energy equipment and services. UCO uses futures contracts across the New York Mercantile Exchange and Intercontinental Exchange exchanges to track the price of WTI. The ETF invests almost entirely in 1 specific niche of the oil market, so it is exceptionally volatile and subject to seasonal and unexpected price fluctuations. At the same time, this makes the fund easy to research because you know the oil it tracks.

As a result, ExxonMobil was also this fund’s largest holding at more than 20% in early 2019, while its top 10 holdings equaled more than 67.5% of its total net assets. The volatile industry of oil is quite popular swing trading for dummies among investors because of the returns that it offers. It offers huge returns, but with huge returns, the huge risk is involved. The prices of oil contracts move up and down in a very short span of time.