Crude oil is near a four-year low, and Republicans are about to begin a commanding control of Congress. Now may be good time to make a value play on energy funds.
At the moment, it appears as if the fall in price of crude oil halted when the GOP increased its historic majority in the House of Representatives and gained a new majority in the Senate. While this doesn’t exactly mean new energy sector-friendly legislation will be passed tomorrow, the news of a bill moving forward on the Keystone XL pipeline can breathe new life into the energy sector.
Now may be the best time in recent years to invest in or add exposure to energy sector funds, especially those with heavy regional exposure to North America.
Here are 3 energy funds to consider for your portfolio.
Best Energy Funds — Energy Select Sector SPDR (XLE)
A solid ETF like Energy Select Sector SPDR (XLE) can provide a strong combination of broad energy sector exposure, low expenses, and solid returns for a pure energy sector play.
The XLE’s holdings are almost entirely based in North America, which solidifies its position as a standout energy sector play for a prospective boost in the U.S. energy sector.
The fund provides an inexpensive and efficient way to invest in the U.S. energy equities with a healthy dose of oil and gas exploration firms, as well as refiners, pipelines and drillers. In the portfolio you’ll find top U.S. energy names, such as Exxon Mobil Corporation (XOM) and Halliburton Co (HAL).
The expense ratio is a cheap 0.16%, or just $16 for $10,000 invested.
Best Energy Funds — Vanguard Energy ETF (VDE)
Vanguard Energy (VDE) is another solid ETF offering a low-cost, diversified portfolio of energy sector equities concentrated in North America.
More than 99% of the portfolio holdings include large value plays like Chevron Corp (CVX) and ConocoPhillips (COP).
Historical performance for Vanguard Energy also looks impressive with the 1-year, 3-year, 5-year and 10-year returns that range from the top half to the top quartile of its category. The VDE has returned an average of 11% annually since its inception — beating the S&P 500 by about three percentage points.
The expense ratio is a rock-bottom 0.14%, or $14 for a $10,000 invested, which will keep more energy in your returns.
Best Energy Funds — iShares US Energy ETF (IYE)
Completing our selection of the best energy funds that provide concentrated exposure to the U.S. energy sector, iShares Energy (IYE) continues with the theme of strong performance at a low cost.
iShares Energy is one of the oldest and best energy ETFs available. Going back to 2000, this fund has a long history of producing broad exposure to North American energy equities. This ETF does a good job of tracking the Dow Jones U.S. Oil and Gas Index.
Like other top energy sector index offerings, this fund’s 1-year and 3-year performance ranks are better than 75% of competing funds, and the 5- and 10-year ranks match or beat half of the other energy funds out there.
Supporting performance is the attractive expense ratio of 0.45%, which amounts to $45 for $10,000 invested.
As of this writing, Kent Thune did not hold a position in any of the aforementioned securities. Under no circumstances does this information represent a recommendation to buy or sell securities.
