5 Ways to Play Energy With ETFs | ETF Trends

The push for cleaner air and more fuel-efficient forms of energy has put the entire energy sector on investors’ radar. Everything from green energy, clean coal and the push for natural gas has exchange traded funds (ETFs) primed and ready.

Every well-diversified portfolio needs some allocation to energy, and equity-based ETFs offer investors exposure to large energy giants to small pioneering companies, all wrapped up in a single package. Don Dion for TheStreet shows us how to play energy with ETFs:

  • iShares S&P North American Natural Resources Sector (NYSEArca: IGE). This ETF tracks U.S-traded, natural resource-related, firms in both the energy and materials sectors. It gives exposure to U.S.-traded energy firms, while avoiding over concentration in the oil/gas subsector.
  • First Trust ISE Revere Natural Gas (NYSEArca: FCG). The demand for the extraction and production of this energy source make this ETF a promising play over time. The success of individual companies is tied to the success of natural gas. [Other moves that effect the natural gas ETFs.]
  • PowerShares WilderHill Clean Energy (NYSEArca: PBW). Legislation and regulation is projected to support alternative energy in the future. PBW’s well-balanced portfolio and reasonable expense ratio help to make green energy firms accessible to traders.
  • PowerShares Dynamic Oil and Gas Services (NYSEArca:PXJ). Rather than just focusing on the largest gas and oil firms, PXJ’s portfolio is selected using factors like fundamental growth, stock valuation, investment timeliness and risk factors. No single company makes up more than 5.21% of the underlying portfolio, and  PXJ’s diverse large-, mid- and small-cap components help this fund to stand out among its peers.
  • iShares S&P Global Energy (NYSEArca: IXC). Despite the top-heavy nature of its underlying portfolio, IXC offers inexpensive exposure to a wide range of global energy firms. This large, liquid, ETF tracks the S&P Global Energy Sector Index.This is a good place to start for access to the global energy market. [The global energy market is going to heat up as the recovery gets underway.]

These are far from all of the options available to ETF investors. In addition to broad energy funds, there are narrower sector funds targeting solar, coal, nuclear and wind power. There are also funds that trade futures contracts in heating oil, natural gas, gas and oil. [How commodity ETFs are taxed.]

For more stories about energy, visit our energy category.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.