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Maybe The Right ETF For a Green New Deal

This article was originally published on ETFTrends.com.

The Energy Select Sector SPDR (XLE) , the largest equity-based energy exchange traded fund and rival energy ETFs tumbled Thursday following the introduction of Green New Deal legislation.

“The Green New Deal is now a green new plan, with Rep. Alexandria Ocasio-Cortez, D-N.Y., and Sen. Ed Markey, D-Mass., set to roll out a resolution calling for a complete transition to renewable energy by 2030,” reports NBC News.

While the Green New Deal still has a long way to go before becoming law, it is widely viewed as another political shot across the bow aimed at fossil fuel producers. Investors can remain engaged in a traditional basket of equities while excluding the energy sector with the S&P 500 Ex-Energy ETF (SPXE) , which provides exposure to S&P 500 companies with the exception of those included in the energy patch.

The Green New Deal proposal, which is a non-binding proposal, “calls for new projects to modernize U.S. transportation infrastructure, de-carbonize the manufacturing and agricultural sectors, make buildings and homes more energy efficient... as well as universal health care and federal job and training guarantees,” according to Seeking Alpha.

A Flexible Idea

At a time when the energy sector is some politicians' cross-hairs, SPXE has some benefits for investors to consider.

“An investment in the S&P 500 that excludes a particular sector gives you the flexibility to tailor your core U.S. equity exposure,” according to ProShares. “It can replace a traditional S&P 500 fund, allowing you to underweight or even eliminate a sector in your portfolio.”

Of course, when energy stocks swoon, as was the case last year, SPXE is likely to outperform not only that sector, but the S&P 500 as well. Over the past 12 months, the S&P 500 is higher by just over 3%, but SPXE's gain during that period is 15.72%.

Prior to Thursday, the energy sector had been rebounding this year, but SPXE was up 9.55% year-to-date, an advantage of 42 basis points over the S&P 500.

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