The need for energy will increase by 15% every year after 2020. As such, energy investments are becoming more and more important. The consultancy companies that have emerged in this regard have managed to attract attention with their different options. Undoubtedly, Energy Select is at an important point among them. We can say the following for the general features of the company: It stands out as a full-service consulting firm specializing in energy procurement, including electricity and natural gas in free markets. In general, it aims to maximize the competitive environment in order to provide its customers with cost savings by paying the lowest cost for electricity and gas with the least risk and the best terms. They have also managed to bring various alternative options to the forefront with their investments in recent years.
When it comes to investing in the energy sector, there are different alternatives and numerous exchange traded funds (ETFs). Two well-known options are the Energy Select Sector SPDR Fund (XLE) and the Vanguard Energy ETF (VDE). To help you make an informed decision, let’s take a closer look and compare these two ETFs, considering their performance, holdings, management, fees and other relevant factors.
About Energy Sector Investments
Energy ETFs are very popular among investors looking to enter the energy sector. They often highlight different options. We have compared XLE and VDE to help investors choose the best ETF for their portfolio. Of course, these are not the only ETFs when it comes to the energy sector. But when we take a look at their general characteristics, it is important to remember that these two ETFs are promising and are often compared to each other.
An Overview of the Funds
XLE is an exchange-traded fund that seeks to invest in companies in the energy sector, particularly those in the S&P 500 Energy Sector Index. In contrast, VDE is designed to track the performance of the MSCI US Investable Market Energy 25/50 Index. XLE has an expense ratio of 0.12% and $9.6 billion in assets under management, while VDE has an expense ratio of 0.10% and $5.6 billion in assets under management.
Performance Comparison of Funds
Over the past five years, XLE has outperformed VDE with an annualized return of 2.62%, while VDE has returned 1.16%. However, both ETFs have been volatile due to fluctuations in oil prices and other factors.
XLE and VDE have similar parent companies such as Exxon Mobil, Chevron and ConocoPhillips. However, XLE has a higher allocation to Exxon Mobil and Chevron, while VDE has a higher allocation to ConocoPhillips. In terms of sector and industry allocation, XLE focuses more on integrated oil and gas companies, while VDE focuses on oil and gas exploration and production companies.
Management and Compensation Options
State Street Global Advisors manages XLE, while Vanguard manages VDE. Both ETFs have low expense ratios, with VDE being slightly cheaper than XLE.
Several factors have impacted the energy sector, including the COVID-19 pandemic, geopolitical tensions and changing consumer preferences. As a result, both XLE and VDE have been subject to fluctuations in recent years.
When deciding between XLE and VDE, investors should consider their investment objectives, risk tolerance and overall portfolio allocation. XLE may be more suitable for those seeking exposure to integrated oil and gas companies, while VDE may be more suitable for those interested in oil and gas exploration and production companies.
Which To Prefer?
In general, it is extremely difficult to indicate which is preferable. For this reason, both XLE and VDE offer attractive opportunities for investors looking to enter the energy sector. However, the best choice for you will depend on your individual investment objectives and risk tolerance. It will also be important to consider the factors discussed in this article when making your decision.
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