Energy exchange-traded funds (ETFs) can be useful to investors as they offer both diversification and exposure to the energy sector.
There are currently less than 20 funds that provide exposure to the energy sector, according to The Street. Although these securities can provide some diversification by investing in energy stocks, the sector is not without its challenges. Energy stocks suffer from volatility stemming from surging prices from 2008 to 2011.
These ETFs are based on indices from providers such as Dow Jones, Standard & Poor's, MSCI and Barclays, the media outlet reports. Some of them seek to obtain better performance through active management.
Motley Fool and The Street have both provided recommendations in order to simplify investing for individuals who want to trade these securities. The Street has provided 10 recommended ETFs which are ranked based on factors such as liquidity and expense ratios, and its number 1 recommendation was PowerShares WilderHill Clean Energy ETF (PBW). This ETF is based on the WilderHill Energy Index and generally focuses on renewable sources of energy. Motley Fool recommended the Energy Select Sector SPDR Fund (AMEX:XLE) as its top pick.