Vanguard Energy ETF Will Ride Energy Rebound Up

published 19 February 2015

Investors dropped energy stocks like so many hot potatoes as crude-oil prices plummeted 55% from their highs in the summer of 2014. As a result, Standard & Poor’s Energy index sank 21% over the period, lagging the broad S&P 500-stock index by a remarkable 28 percentage points.

3 Energy Stocks That Pay Safe Dividends

Rather than try to identify individual winners, your best bet may be to buy an energy-sector fund. A solid, low-cost choice is Vanguard Energy ETF(VDE). The exchange-traded fund tracks an index of companies that cover a broad swath of the industry, from oil-rig builders and drill-equipment makers to oil refiners and transportation companies. The fund’s 168 holdings are weighted by stock market value—the bigger a stock’s capitalization, the bigger its position in the fund—so behemoths ExxonMobil and Chevron account for more than one-third of the ETF’s assets. But shares of “big oil” tend to hold up better than the overall sector, in part because they operate across the many segments of the industry. As a result, the ETF has been 21% less volatile than its peers over the past three years.

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Pitsker joined Kiplinger in the summer of 2012. Previously, she interned at the Post-Standard newspaper in Syracuse, N.Y., and with Chronogram magazine in Kingston, N.Y. She holds a BS in magazine journalism from Syracuse University's S.I. Newhouse School of Public Communications.