U.S. Markets open in 4 hrs 27 mins

9 Best Low-Cost Energy ETFs to Buy Now

Jeff Reeves

Affordable choices for cost-conscious energy investors.

Crude oil prices have risen steadily since October, sparking interest in the energy sector. But while most investors think about potential returns when they plan a trade on this trend, it's crucial to consider the impact of trading costs and management fees on your portfolio. If you're looking at investing in the energy sector, make sure you take into account the low-cost exchange-traded fund options. There are several that charge investors less than $4 annually on every $1,000 they invest. That's a small price to pay for the diversification and strategy these funds provide. If you want to play crude oil's recent rise, consider one of these nine ETFs that cut out some of the costs.

Energy Select Sector SPDR ETF (ticker: XLE)

This fund is the largest dedicated energy fund, with more nearly $11 billion in total assets under management. It's also one of the most affordable, too, making it a simple way for cost-conscious investors to get exposure to oil and gas equities through an exchange-traded product. One noteworthy characteristic, however, is the fund is weighted by size so Exxon Mobil Corp. (XOM) and Chevron Corp. (CVX) make up more than 40% of the portfolio. There are less than 30 holdings, meaning it's very focused on a small list of stocks.

Expense ratio: 0.13% ($1.30 annually on every $1,000 invested)

Vanguard Energy ETF (VDE)

Vanguard's funds are known for undercutting the competition on cost, and this energy-specific offering proves that rule again with the lowest pricing in the sector. It also is no slouch on total assets under management, with more than $3 billion invested in this fund at present. VDE is slightly more diversified than the prior fund with about 70 total holdings, but it's equally dependent on Chevron and Exxon; the oil giants still dominate the portfolio with a shared value of roughly 40% between the duo.

Expense ratio: 0.10% ($1 annually on every $1,000 invested)

Fidelity MSCI Energy ETF (FENY)

Yet another take on the broad-based energy funds, Fidelity is a bit smaller at just about $425 million in assets. It's also similar in makeup with Exxon and Chevron collectively making up about 40% of the fund and the usual suspects like ConocoPhilips (COP) filling out the portfolio. However, what Fidelity does offer is a fairly large list of about 70 individual stocks. It also offers the cheapest expense ratio of any energy fund. If you truly care about costs as well as performance, then FENY is worth a look.

Expense ratio: 0.084% (84 cents annually on every $1,000 invested)

SPDR S&P Oil & Gas Exploration & Production ETF (XOP)

Looking for low-cost energy ETFs doesn't mean settling for a vanilla fund that targets the most obvious stocks. This SPDR offering moves away from big oil and focuses on about 60 companies that mainly do business as exploration and production firms. A plus is a bigger mix of stocks. For instance, WPX Energy (WPX) is the top position in this fund at present but still represents less than 3% of the entire portfolio. However, investors should expect a bit more volatility from this fund since these are smaller stocks directly exposed to changes in crude oil prices.

Expense ratio: 0.35% ($3.50 annually on every $1,000 invested)

VanEck Vectors Oil Services ETF (OIH)

Another ETF offering a different take on the oil patch is OIH, which focuses on service stocks instead of giants like Exxon. There is an industry of third-party companies that help with well drilling, transportation and other efforts necessary to make the energy sector function. These providers make up this Van Eck fund. Leaders Schlumberger Ltd. (SLB) and Halliburton Co. (HAL) top the portfolio of almost 70 stocks. As companies one-step removed from the act of exploration, you may deem OIH as a better alternative to other cheap energy ETFs.

Expense ratio: 0.35% ($3.50 annually on every $1,000 invested)

SPDR S&P Oil & Gas Equipment & Services ETF (XES)

Similar to OIH, this SPDR fund also includes third-party companies that offer equipment and services to the energy industry. Where it differs, however, is with a bias toward smaller companies like Valaris (VAL) and Nabors Industries Ltd. (NBR). Those are the top two holdings at present but together add up to less than $2.5 billion in market value. Some investors are willing to take on a bit more risk to capture more upside. That's what XES offers via smaller and faster-moving service stocks as its top positions.

Expense ratio: 0.35% ($3.50 annually on every $1,000 invested)

Invesco S&P 500 Equal Weight Energy ETF (RYE)

Can't decide how to slice up the energy sector? Wondering why each fund so far focuses on one group of stocks and ignore the rest? Then check out RYE, which is an equal weight fund that doesn't play favorites. Though there are about 30 stocks on the list, representing the biggest and most connected names in the S&P 500, this ETF rebalances regularly to ensure no single position is worth any more or less than its peers. That provides a smoother ride and dedicated exposure to the energy sector in a cost-effective manner.

Expense ratio: 0.40% ($4 annually on every $1,000 invested)

Tortoise North American Pipeline ETF (TPYP)

A different take on oil and gas stocks is this smaller but highly tactical ETF. It focuses on pipeline operators and energy infrastructure plays that are primarily master limited partnerships. This special class of stock makes shareholders true partners in the business -- fueling big-time income via dividends, but not that much investment in growth. Though not as well-known a brand, Tortoise has nearly $500 million in the TPYP fund. That's a testament to the popularity of this fund's investment strategy as well as the staying power of this up-and-coming ETF operator.

Expense ratio: 0.40% ($4 annually on every $1,000 invested)

iShares MSCI Global Energy Producers ETF (FILL)

One drawback of all the funds so far is that they are decidedly domestic investments. There's a great big world of energy stocks, including international players like France's Total (TOT) that boasts 100,000 employees and a market capitalization of nearly $150 billion or U.K.-based BP (BP), which has a market value of $130 billion. If you want to tie in these international integrated energy companies as well as big U.S. players like Exxon, then FILL is a great cost-effective option.

Expense ratio: 0.39% ($3.90 annually on every $1,000 invested)

Best low-cost energy ETFs to buy now:

-- Energy Select Sector SPDR ETF (XLE)

-- Vanguard Energy ETF (VDE)

-- Fidelity MSCI Energy ETF (FENY)

-- SPDR S&P Oil & Gas Exploration & Production ETF (XOP)

-- VanEck Vectors Oil Services ETF (OIH)

-- SPDR S&P Oil & Gas Equipment & Services ETF (XES)

-- Invesco S&P 500 Equal Weight Energy ETF (RYE)

-- Tortoise North American Pipeline ETF (TPYP)

-- iShares MSCI Global Energy Producers ETF (FILL)



More From US News & World Report