Energy ETF: Does Continued Growth Around The World Make These a Sure Bet?

It doesn't take an experienced investor to recognize the potential in almost any energy ETF. Why not? Just consider that there are environmental movements as well as financial indicators that all seem to point towards an energy ETF as an almost “sure thing” which now that I've said guarantees a decline!

For example, a natural gas ETF is something that is going to inevitably yield some impressive returns simply because the industry is positioned to expand and grow by more than 60% within the next two decades.

Also consider that almost all professional investors and market experts are suggesting that all portfolios should contain some sort of energy investments, and that an energy ETF is a great way to get the proverbial foot in the door.

This is because the authorized participants can usually get their investors involved in large energy companies and also with smaller firms too, and usually all in the same fund. This means that a startup alternative supplier may be included in a portfolio that also has holdings in a massive, global energy ETF as well. Clearly, it is this kind of diversity that is so essential to profitable holdings.

Something to remain extremely mindful of when considering any energy ETF is the fact that there should be no over-concentration within any specific sector or category. Yes, the natural gas industry may very well boom in the coming decades, but an investor should not try to benefit from this anticipated growth spurt at the cost to other options and subsector investments. My preference is to ensure that a fund is diverse and balanced which I like to believe is a reasonable approach to profit.

For instance, energy means clean energy, oil and gas supplies, and other natural resources. It is also a wise idea to understand that the ETFs might offer a great “package deal” that touch on firms of many sizes within a single segment, but there are also a few other ways to access the energy market. For instance, there are machine and equipment segments, exploration and production options, and there are the much narrower funds that focus on things like wind or solar power too.

Do a bit of research and comparison shopping when considering any of the energy ETFs. Choose only those that are clearly focusing on the future potential of the energy industry, but which are not losing out on the rapid changes happening today. Often, this means doing a bit of math to ensure that no single company or area of a fund consumes over five percent of the total portfolio – regardless of how profitable it appears.

What are some good options? PowerShares Dynamic Oil and Gas Services (PXJ), iShares S&P North American Natural Resources Sector (IGE), and iShares S&P Global Energy (IXC) are extremely popular.

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