Invesco’s S&P SmallCap Energy tracks the S&P SmallCap Energy index. Because it’s market cap-weighted, the larger a company is, the more it dominates the fund – Exxon Mobil and Chevron alone account for 38% of the portfolio. Finally, many of the largest energy companies have gotten incredibly lean and efficient in recent years. They’ve paid down debt, boosted margins and focused on capital discipline. The oil giant has increased its dividend payment for 38 straight years.
What is an oil ETN?
The energy sector is constantly influenced by factors like global demand, production levels, and geopolitical events. IEO tracks the Dow Jones U.S. Select Oil Exploration & Production Index, which is comprised of U.S. equities within the oil and gas exploration and production sector. The market-cap-weighted ETF provides exposure to companies engaged in the exploration, production, and distribution of oil and gas. The fund follows a blended strategy, investing in a mix of growth and value stocks of various market caps. The United States Oil Fund is an exchange-traded security that provides investors with more direct exposure to oil prices. This approach allows investors to make a directional bet on the price of oil without having to engage in futures trading or risk that an oil stock investment will underperform the price of crude oil.
This fund seeks to track a modified equal-weighted index that provides the potential for unconcentrated industry exposure across large, mid, and small-cap stocks. It also allows investors to take strategic or tactical positions at a more targeted level than traditional sector-based investing. UGA majorly invests in listed RBOB futures contacts and other gasoline futures contracts.
Best Rent Reporting Services
Rising oil prices have also helped power a rise in shares of energy companies, with the S&P 500 energy sector up 15% since late June. Perhaps the most popular, though, is that it’s a more straightforward method of getting exposure to movements in oil prices or in a cross-section of the energy sector. If you want to invest in Oil ETFs the right way, here is a quick guide that can help.
- At its peak, Standard Oil controlled roughly 91% of U.S. oil production.
- The iShares Oil & Gas Exploration & Production UCITS ETF invests in stocks with a focus on Energy, World.
- We believe everyone should be able to make financial decisions with confidence.
This Top Dividend ETF Loves These Leading Oil Stocks. Should You Buy Them, Too?
There are several top oil stock ETFs, giving investors many easy ways to add some oil market exposure to their portfolios. HUC tracks the Solactive Light Sweet Crude Oil Winter MD Rolling Futures Index ER. Rather, it gains exposure to the price of Best oil etf crude oil by using futures contracts, which are derivatives that bet on the future anticipated value of a commodity. As of September 2024, HUC costs a MER of 1.11% and is best suited for short-term trading or hedging purposes. The Energy Select Sector SPDR Fund is the largest ETF focused on oil and gas exploration and production.
Over the past five years, the company has grown its dividend faster than the S&P 500 and nearly double the rate of its closest peer. All the oil ETFs presented above are available in NAGA WebTrader among other popular ETFs listed on 10 major stocks exchanges. For this reason, a demo account with us is a great tool for investors who are looking to make a transition to leveraged trading. A CFD is a contract in which you agree to exchange the difference in the price of an asset from when you first open your position to when you close it.
These corporations have established operations, significant oil reserves, and have demonstrated resilience across different market circumstances. While the ETF is rated as high risk, the addition of a covered call strategy does help to reduce some of the downside volatility (from the constant return of call premiums). The fund comes with a relatively higher MER than some of its peers. ENCC has a long performance track record and is a fairly small ETF. It is likely not small enough to put it at risk of closing down in the future due to a low asset level. Similar to most other energy ETFs and funds, XEG is rated as a high-risk fund.
What’s the difference between WTI and Brent crude oil?
While most Canadian oil stocks pay quarterly dividends, some Canadian oil ETFs will pay monthly distributions by aggregating the dividends paid by the underlying stocks. This can be desirable for investors looking for more consistent income. When investors buy shares of a Canadian oil ETF, they receive proportional exposure to all the underlying oil stocks. This approach requires less money, as you must only buy a single ETF instead of shares of multiple different individual Canadian oil stocks.
Oil ETFs give investors access to a wide range of companies in the oil sector. This is a market-cap weighted fund, so its holdings are highly concentrated in larger companies. The fund is on the smaller side, with only $175.3 million in net assets. This fund invests in both local and foreign companies, but all of its holdings are listed on US exchanges. The 25 companies it holds are the largest, most notable companies in the oil equipment and services sector, so they represent some of the top picks in the category.
Stock Strategies
- It’s also worth noting that this fund processes the Schedule K-1s sent by the MLPs and sends its investors a Form 1099.
- This can erode returns in ETFs that roll over near-month futures contracts, as they are forced to repeatedly buy higher-priced contracts.
- Delivering WTI to high-demand markets in Europe and Asia can be so expensive that it can’t compete with Brent in terms of pricing.
- While Canadians can purchase individual oil stocks, a simpler and more diversified approach might be purchasing a Canadian oil industry exchange-traded fund, or ETF.
- The MER is comprised of the ETF’s management fee plus manager’s trading, operational, administrative, and marketing costs.
- In early 2025, the ETF offered a dividend yield of more than 7.5%, making it ideal for investors seeking to generate passive income from the oil market.
The companies within the index are selected based on various investment merit criteria, including price and earnings momentum, quality, management action, and value. It includes petroleum refineries, companies that gather and process natural gas, and those that manufacture natural gas liquid (NGLs). The fund follows a blended strategy of investing in a mix of growth and value stocks of various market capitalizations. Oil ETFs offer investors a way to participate in the crude oil market without directly trading futures contracts or physically storing oil.
UCO aims to double the daily price movement of crude oil, which means you can win big – or lose even faster. Investing in China offers exposure to the world’s second-largest economy, presenting unique growth opportunities driven by its vast consumer market, technological advancements, and ongoing development. The United States Oil Fund is an inexpensive ETF that tracks the price of West Texas Intermediate Light Sweet Crude Oil. The VanEck Vectors Oil Services ETF focuses entirely on the oil industry of the United States by tracking the MVIS U.S. Listed Oil Services 25 Index. Though it’s about four times as expensive as its U.S.-focused peers, IXC is still liquid and delivers a higher yield – making it a worthy trade-off for access to international holdings.
This gas and oil services ETF holds 32 different companies that service the energy sector. These funds track the price of West Texas Intermediate, which is the benchmark price for US crude oil. There are various types of crude ETFs, but the most basic funds track oil prices through the use of commodities and options. They need to keep drilling, exploring and upgrading infrastructure to stay in the game. Sarah Horvath is a seasoned financial writer with a specialization in investing content.
Investing in Oil ETFs is generally considered a sound strategy for investors seeking broad market exposure, diversification, and relatively low risk. However, it’s crucial to assess your financial goals, risk tolerance, and time horizon before investing. You can protect yourself against losses by making oil ETFs only a small percentage of your portfolio. Balance your selections with an investment in a total market index fund in case the oil industry continues to deal with oversupply and low prices. 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.