Oil and gas exchange-traded funds (ETFs) offer investors more direct and easier access to the often volatile energy market than many other alternatives. While there is the potential for significant returns by investing in the oil and gas sector, the risks can be high. Oil futures, for example, tend to be volatile and often require a significant initial investment, which excludes many investors. By contrast, oil and gas ETFs offer access to a basket of energy equities. While some oil and gas ETFs track futures contracts or commodities prices, the ETFs below are solely focused on stocks of oil and gas companies.
- The oil and gas sector dramatically underperformed the broader market over the past year.
- The ETFs with the best 1-year trailing total return are MLPX, FCG, and FILL.
- The top holdings of these ETFs are TC Energy, Apache, and Exxon Mobil, respectively.
The oil and gas ETF universe is comprised of about 22 ETFs, excluding inverse and leveraged ETFs, as well as funds with less than $50 million in assets under management (AUM). The oil and gas sector, as measured by the Energy Select Sector SPDR ETF (XLE), has dramatically underperformed the broader market with a total return of -27.6% over the past 12 months compared to the S&P 500's total return of 19.5%. The best-performing oil and gas ETF for Q4 2020, based on performance over the past year, is the Global X MLP & Energy Infrastructure ETF (MLPX). We examine the top 3 best oil and gas ETFs below. All numbers in this story are as of August 17, 2020.
- Performance over 1-Year: -13.5%
- Expense Ratio: 0.45%
- Annual Dividend Yield: 7.03%
- 3-Month Average Daily Volume: 166,866
- Assets Under Management: $527.9 million
- Inception Date: August 6, 2013
- Issuer: Global X
MLPX tracks the Solactive MLP & Energy Infrastructure Index, holding a basket of multi-cap energy master limited partnerships (MLPs) and energy infrastructure corporations. The fund is principally focused on midstream energy companies, which includes companies that own and operate assets used in energy logistics, such as pipelines, storage facilities, and more. Its top three holdings include TC Energy Corp. (TRP), a Canada-based provider of energy infrastructure services; Enbridge Inc. (ENB), a Canada-based energy transportation company; and Williams Companies Inc. (WMB), an energy infrastructure company.
- Performance over 1-Year: -20.0%
- Expense Ratio: 0.60%
- Annual Dividend Yield: 3.31%
- 3-Month Average Daily Volume: 1,171,222
- Assets Under Management: $89.3 million
- Inception Date: May 11, 2007
- Issuer: First Trust
FCG tracks the ISE-Revere Natural Gas Index, an equal-weighted index comprised of companies that derive a significant portion of their revenues from the exploration and production of natural gas. This multi-cap ETF follows a blended strategy, investing in a mixture of small and large-cap companies. The fund's top three holdings include oil and gas exploration and production companies Apache Corp. (APA), Pioneer Natural Resources Co. (PXD), and Occidental Petroleum Corp. (OXY).
- Performance over 1-Year: -23.5%
- Expense Ratio: 0.39%
- Annual Dividend Yield: 7.94%
- 3-Month Average Daily Volume: 37,626
- Assets Under Management: $52.3 million
- Inception Date: January 31, 2012
- Issuer: iShares
FILL tracks the MSCI ACWI Select Energy Producers Investable Market Index, which is comprised of companies principally focused on energy exploration and production. The index excludes companies deriving a substantial portion of their revenues from marketing, energy storage or transportation, or alternative fuels. This ETF is concentrated toward companies with large market capitalizations. Despite its name, it is also heavily weighted towards U.S. energy stocks, which comprise roughly half of its total holdings. Its top three holdings include Exxon Mobil Corp. (XOM), a multinational oil and gas company; Chevron Corp. (CVX), a multinational energy company; and Total SE (FP:PAR), a France-based multinational oil and gas company.