Energy ETF

AAA

DEFINITION of 'Energy ETF'

A broad class of ETFs that includes funds focused on oil and gas exploration; the generation, distribution and retail sale of gas and other refined products; electric utilities and alternative energy production. Energy ETFs may invest in only United States-based companies, globally based energy companies, or a blend of the two.

INVESTOPEDIA EXPLAINS 'Energy ETF'

The offerings within the energy ETF class include replications of the energy-sector stocks found in the S&P 500, U.S. energy producers, global energy producers and funds of a particular sub-sector designation, such as nuclear, coal, gas, etc. The weighting of stocks within these ETFs can be market-cap based, equally-weighted or fundamentally weighted, based on financial metrics like net earnings and dividend yield.

Energy ETFs represent a sector that is widely held by both conservative and risky investors, because energy represents a large portion of the broad economy. This is evidenced by energy's high percentage allocation within broad market averages like the S&P 500.

Energy ETFs have the advantage of intraday pricing and trading, which can make them more attractive than similarly invested mutual funds. Investors should read the fact sheets and prospectuses carefully to be sure of what guidelines an ETF has with regards to similar focus areas, such as mining and commodities.

RELATED TERMS
  1. T. Boone Pickens

    One of America's foremost oil and gas entrepreneurs, T. Boone ...
  2. Billions Of Cubic Feet Equivalent ...

    A natural gas industry term typically used to measure the amount ...
  3. Energy Derivatives

    A derivative instrument in which the underlying asset is based ...
  4. Sector Rotation

    The action of a mutual fund or portfolio manager shifting investment ...
  5. Standard & Poor's 500 Index - S&P ...

    An index of 500 stocks chosen for market size, liquidity and ...
  6. Oil ETF

    A category of exchange-traded funds that invest in companies ...
Related Articles
  1. Mutual Funds & ETFs

    An Introduction To Sector ETFs

    Find out how these specialized ETFs can give your portfolio the punch it needs.
  2. Investing

    Clean Or Green Technology Investing

    Innovations in energy and consumption grow as companies adopt them to reduce costs.
  3. Mutual Funds & ETFs

    ETFs Provide Easy Access To Energy Commodities

    Hedge against rising energy prices and diversify your portfolio with these funds.
  4. Personal Finance

    Five Companies Leading The Green Charge

    Corporations that reduce their environmental footprint anticipate large long-term gains.
  5. Mutual Funds & ETFs

    ETFs Characteristics for Short-Term Trading

    Not all ETFs fit the short-term trading scenario. Investopedia tells you the main characteristics to shortlist ETFs for the best trading fit.
  6. Mutual Funds & ETFs

    Why Big Russia Bettors Should Consider This ETF

    Investing in the RSX ETF is investing in Russia.
  7. Mutual Funds & ETFs

    PIMCO vs. BlackRock: Weighing Mega Fund Managers

    A look at the world's biggest bond manager and the world's largest asset manager.
  8. Mutual Funds & ETFs

    The ABCs of Mortgage-Backed Securities ETFs

    ETFs focused on mortgage-backed securities, or MBS, offer an opportunity to further diversify the fixed-income portion of your portfolio.
  9. Chart Advisor

    Why You Must Watch These Currency ETF Trade Levels

    Major currencies have been pushed lower on U.S. dollar strength. Here are trade setups for if the trend continues, or reverses.
  10. Mutual Funds & ETFs

    Buying ETFs on Margin Versus Leveraged ETFs

    Leveraged ETFs and investing in an ETF on margin both have their advantages and disadvantages.

You May Also Like

Hot Definitions
  1. Efficiency Ratio

    Ratios that are typically used to analyze how well a company uses its assets and liabilities internally. Efficiency Ratios ...
  2. Fixed Cost

    A cost that does not change with an increase or decrease in the amount of goods or services produced. Fixed costs are expenses ...
  3. Subsidy

    A benefit given by the government to groups or individuals usually in the form of a cash payment or tax reduction. The subsidy ...
  4. Sunk Cost

    A cost that has already been incurred and thus cannot be recovered. A sunk cost differs from other, future costs that a business ...
  5. Technical Skills

    1. The knowledge and abilities needed to accomplish mathematical, engineering, scientific or computer-related duties, as ...
  6. Prepaid Expense

    A type of asset that arises on a balance sheet as a result of business making payments for goods and services to be received ...
Trading Center