Like many exchange-traded funds (ETFs), crude oil ETFs are an investment option for those who want exposure to the oil sector but do not want the complications and risks that come with oil futures. Crude oil ETFs offer the investor exposure to various facets of the industry while being professionally managed.
The Vanguard Energy ETF (VDE) offers investors a diverse play on the oil sector. Read on to find out more about this ETF. including its top holdings, returns, and fees.
- The Vanguard Energy ETF invests in a wide range of oil companies, with a focus on the industry giants like ExxonMobil and Chevron.
- Its recent performance is less than stellar, with a five-year average return of -2.00% and a ten-year average return of 1.47%.
- It held up well in comparison with oil futures funds in the last oil crisis, in 2016.
Vanguard Energy ETF Basics
The Vanguard Energy ETF was launched on Sept. 23, 2004. It has $6.7 billion in assets under management (AUM) as of Dec. 17, 2021.
The fund is passively managed and tracks the MSCI US Investable Market Energy 25/50 Index, which is composed of a variety of stocks of companies of various sizes in the energy sector. These include companies involved in oil, natural gas, and coal exploration, production and distribution.
As of Dec. 17, 2021, the fund was trading at $75.14 per share. The 52-week high for one share was $84.21, while the 52-week low was $50.59.
The fund’s 141 holdings are weighted by market capitalization, meaning larger companies have a bigger position in the fund. The fund invests in smaller companies on a reduced scale. The majority of the companies it invests in are U.S. companies. Foreign holdings total 0.7%.
Top 10 Holdings of Vanguard Energy ETF
The fund's top 10 holdings include ExxonMobil Corp., Chevron Corp., ConocoPhillips, EOG Resources Inc., Schlumberger Ltd., Marathon Petroleum Corp, Phillips 66, Valero Energy, Kinder Morgan Inc. Class P, and Pioneer Natural Resources Co.
Some investors avoid funds that buy industry behemoths almost exclusively. Others value the relative stability of the giants, given the oil industry's high risk and high-cost nature.
The fund's top holdings are involved in a variety of oil-related businesses including the construction or provision of oil rigs, drilling equipment, energy-related equipment and services, and the exploration, production, marketing, refining, and transportation of oil and gas products.
About 40% of the fund's total holdings are focused on the integrated oil and gas sector, which involves companies whose business includes natural gas and coal energy products.
Vanguard Energy ETF Returns
VDE showed a decent average after-tax return of 4.23% from its inception on Sept. 23, 2004 until Dec. 17, 2004.
Its recent performance was less attractive, at a five-year average return of -2.00% and a ten-year average return of 1.47%.
The fund held up fairly well when oil prices saw increased volatility at the beginning of 2016. The fund declined just over 8% in the first weeks of 2016, compared to the United States Oil Fund (USO), a popular oil futures ETF, which declined more than 24% in the same period.
Vanguard Energy ETF Fees
ETFs charge investors fees to cover the fund's management and operation.
The Vanguard Energy ETF has relatively low management fees with a modest 0.10% expense ratio, which is composed of a 0.07% management fee and 0.03% in other expenses. The fund also rewards its investors with quarterly distributions.
The Bottom Line
ETFs have been around for about 25 years and have become a popular alternative investment category. Many ETFs come with low fees because they follow a less expensive indexing strategy.
They offer investors exposure to a wide range of equities and securitie, without the risks associated with the physical commodity on which they may focus.
The Vanguard Energy ETF, which tracks the MSCI US Investable Market Energy 25/50 Index, is a less risky way to invest in oil than buying oil futures. It gives investors access to some of the world's largest energy companies that operate in a variety of business segments.
Investopedia does not provide tax, investment, or financial services and advice. The information is presented without consideration of the investment objectives, risk tolerance, or financial circ*mstances of any specific investor and might not be suitable for all investors. Past performance is not indicative of future performance. Investing involves risk, including the possible loss of principal.
