Make Profits From Rising Oil With These 3 Energy ETFs

Pain at the pump is an economic pinch almost every one of us can understand.

On the upside, the advent of hybrid and electric vehicles is making it so that fewer and fewer of us feel that pain.

On the downside … *looks east*.

But oil prices that are currently high and that potentially rise even higher are a firm reminder of a longheld economic hedge for those who are fortunate enough to have at least some money invested in the stock market: energy stocks.

Or for those of us who like to keep it easy and diversified: energy exchange-traded funds (ETFs).

Why Energy ETFs?

If you want to take back some of the profits that Exxon Mobil (XOM), Chevron (CVX), and the like are pulling from your pockets, energy ETFs are among the easiest (and, in our view, best) ways to do that.

Of course, retail gas is just one small part of the energy sector. There are firms that pull oil or gas out of the ground, others that transport and/or store energy commodities, still others that refine oil and gas into consumer products (like gasoline), and still others that work in alternative energy sources such as solar and wind.

Because of this, energy ETFs can meet numerous needs—funds owning emerging energy plays can produce high growth, while other funds may provide high dividend yields to longer-term investors, and still other funds may be a great source of gains for short-term traders leveraging big swings in commodities like oil and natural gas.

So in today's Weekend Tea, I'm going to introduce you to a few energy ETFs that show the sector's range. You can check out the full list in my look at the best energy ETFs, but this will give you a great idea of some of the best funds out there and how widely these strategies can differ.

How Did I Select These Funds?

Under normal circumstances, I would boot up Morningstar Investor and run a quality screen. However, in this case, I already know there are going to be certain exceptions that Morningstar's screener can't account for (through no fault of its own). For instance, I know that many "focused" commodity funds—like physical gold ETFs and physical silver ETFs—don't carry medalist ratings.

So this is admittedly a more subjective picks list with only one parameter: I've made sure that all the energy ETFs listed here have at least $100 million in assets under management (AUM), reducing the risk that any of the funds here will be closed by their provider. There's no universal AUM threshold that everyone agrees significantly reduces the risk, but $100 million is a decent baseline for funds that have been around a few years.

Let's get to the funds!

State Street Energy Select Sector SPDR ETF

• Assets under management: ~$42 billion
• Dividend yield: 2.4%
• Expense ratio: 0.08%, or 80¢ annually on a $1,000 investment

What is XLE?

The State Street Energy Select Sector SPDR ETF (XLE) is the largest energy sector ETF by a country mile—it commands four times more assets than the second-largest such fund, the Vanguard Energy ETF (VDE). It's also been around for more than a quarter of a century, going live in 1998.

This cheap, simple index fund provides extremely basic exposure to energy (primarily oil and gas) for investors who don't want to go stock-picking in the sector.

What does XLE hold?

The XLE holds all of the energy-sector stocks in the S&P 500, which at the moment is 22. But not all energy companies are in the same kind of business.

Top holdings Exxon and Chevron are called "integrated" companies, meaning they span upstream (exploration and production), midstream (transportation and storage), and downstream (refining, distributing, and retail). Some holdings are only engaged in one or two "streams"—Phillips 66 (PSX), for instance, doesn't engage in extracting oil or gas, but it does refine, transport, store, and sell energy products. (Have you seen a Phillips 66 gas station? That's part of their retail unit.)

What else should you know about XLE?

Here's a term every beginner investor should know: "cap-weighted."

Cap-weighted is short for "market capitalization-weighted," which means that the bigger the stock, the more assets a fund dedicates to that stock. Exxon, at $670 billion in market capitalization, is the largest stock XLE holds—and it also enjoys the largest "weight," at 23% of XLE's assets. By comparison, $15 billion APA Corp. (APA) accounts for just 0.8% of assets.

Why does that matter? The more of a fund's assets a stock commands, the more effect its performance has on the fund's performance. Effectively, Exxon accounts for 23% of XLE's performance. Chevron, by the way, accounts for another 17%, so that means just two stocks—XOM and CVX—are responsible for 40% of XLE's returns! This is called "concentration risk," and it's something you need to think about whenever you own a fund—if you already own Exxon and Chevron, buying this SPDR energy ETF puts even more weight on those two stocks' shoulders.

Young and the Invested Tip: Love investing in ETFs? Here are our best exchange-traded funds for 2026, whether you need core holdings, tactical plays on 2026 trends, or defensive positions.

APA, in the meantime, accounts for less than 1%. So even a very big move from APA might not be noticeable in XLE's performance.

That doesn't necessarily mean State Street Energy Select Sector SPDR ETF is bad. XLE is different from many other funds in that most of its holdings are extremely sensitive to one factor: changes in commodity prices. That means if XOM moves, chances are that ConocoPhillips (COP), EOG Resources (EOG), and all of XLE's other holdings are moving in a similar direction. Even if the fund's assets were more evenly distributed, it might not make all that much of a difference. So despite XLE being extremely imbalanced, it remains an effective way to get exposure to the energy sector.

One last note: Dividends from the energy sector are much higher than the market as a whole. XLE often yields more than 3%, but that's "down" to the mid-2% area because of energy's rapid gains over the past few months. And that's still double the 1.2% offered up by the S&P 500.

Invesco DB Oil Fund

• Assets under management: ~$355 million
• Dividend yield: 2.1%
• Expense ratio: 0.73%*, or $7.30 annually on a $1,000 investment

What is DBO?

The Invesco DB Oil Fund (DBO) is a commodity fund that allows investors to track the price of West Texas Intermediate (WTI) light, sweet crude oil via futures contracts.

What does DBO hold?

This Invesco fund tracks the DBIQ Optimum Yield Crude Oil Index Excess Return index, which will generally hold a single month's WTI oil contract. For instance, right now, it holds NYMEX Light Sweet Crude Oil Futures expiring in August 2026.

It also will hold Treasury securities (usually through a fund), as well as money market funds, which will produce income that the ETF distributes on an annual basis.

What else should you know about DBO?

In each of the previous funds, you're generally trying to reap the benefits of rising oil, gas, and other energy commodity prices by owning equities tied to those commodities. DBO is more direct—performance is tied to oil futures contracts with no corporate middleman.

That said, futures are hardly perfect. While spot prices factor heavily into futures prices, they're not the only variable—they also consider "cost of carry" (storage, insurance, financing), which among other things means that interest rates are also involved.

Young and the Invested Tip: If you prefer funds with a little more income potential, you'll want to check out our list of the best high-yield dividend ETFs.

One big risk you have to consider in futures funds is contango, when futures prices are higher than the current spot price. In the case of some commodity funds, they'll hold only the front-month futures contract, then sell that right before it expires to purchase the next month's futures contract. And there's a risk that the fund will sell that front-month contract for less than what it will pay to purchase the next month's contract.

DBO is built to defray this risk somewhat. Rather than automatically roll over its expiring contracts into next-month contracts, it can roll its contracts over into any futures contract within the next 13 months. This allows DBO to benefit from another futures condition, "backwardation," in which you sell more expensive expiring contracts to purchase less expensive futures (basically the opposite of contango).

* 0.81% gross expense ratio is reduced with an 8-basis-point fee waiver until at least Aug. 31, 2026.

State Street SPDR S&P Kensho Clean Power ETF

• Assets under management: ~$193 million
• Dividend yield: 1.4%
• Expense ratio: 0.45%, or $4.50 annually on a $1,000 investment

What is CNRG?

Some investors want more than old, dirty energy—they want new, cleaner energy. And that's what the State Street SPDR S&P Kensho Clean Power ETF (CNRG) is designed to provide. The clean energy types CNRG targets includes solar, wind, hydroelectric, and geothermal.

CNRG does this by tracking the S&P Kensho Clean Power Index, which itself holds components from two Kensho indexes—the S&P Kensho Cleantech Index and the S&P Kensho Clean Energy Index.

What does CNRG hold?

By tracking two indexes, CNRG provides two somewhat different types of clean-energy exposure within the same fund. The S&P Kensho Cleantech Index is made up of companies that "offer products and services related to manufacturing the technology for renewable energy," while the S&P Kensho Clean Energy Index is made up of companies that "offer products and services related to renewable energy."

They sound really similar, but they're not at all the same.

The "Cleantech" holdings include companies like Bloom Energy (BE) and GE Vernova (GE) that provide technology in and around clean energy—Bloom Energy, for instance, produces fuel cells that produce electricity onsite in places like data centers and factories, while GE Vernova produces, among other things, wind turbines for wind energy and aerating turbines for hydroelectric energy.

Young and the Invested Tip: Is the market's recent lurching a little more than you'd care to stomach? Consider these low- and minimum-volatility ETFs.

The "Clean Energy" holdings, for the most part, actually produce the clean energy. For instance, NextEra Energy (NEE), through its NextEra Energy Resources subsidiary, is the world's largest generator of renewable energy from wind and solar.

All told, CNRG currently holds 43 stocks. The SPDR S&P Kensho Clean Power ETF uses a quantitative weighting methodology that ensures the biggest companies don't dictate the fund's performance. CNRG's top holding, SolarEdge Technologies (SEDG), accounts for 4.7% of assets; no other component accounts for more than 4% right now.

Also, because of the fund's split focus between higher-yielding sectors such as utilities and energy, and "growthier" sectors like technology and industrials, CNRG offers some growth potential and some income potential—but not necessarily a high amount of either.

What else should you know about CNRG?

Why invest in the companies that the Kensho Clean Power ETF holds when rising oil or natural gas prices wouldn't put another dime in their pockets?

Because rising and/or sky-high energy prices, as well as fears about the stability of energy supply (say, I don't know, the Strait of Hormuz), might very well propel increased interest in alternative energy sources like solar, wind, nuclear, and more. And that helps to put coin in CNRG's holdings' coffers.

—

March is over, but March Madness still has a few flickers left. Good luck to all of the remaining teams (except Michigan)!

Riley & Kyle

Young and the Invested

Disclaimer: This article does not constitute individualized investment advice. Individual securities, funds, and/or other investments appear for your consideration and not as personalized investment recommendations. Act at your own discretion.

Like what you're reading but not yet a subscriber? Get our weekly financial insights and updates delivered to your inbox every Saturday morning by signing up for The Weekend Tea today! You can also follow us on Flipboard for more great advice and insights.