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ETF Specialist

Avoid a Potential Minefield in the Oil Patch

This ETF offers a cheap and broadly diversified way to invest in the volatile energy sector.

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With a constant flow of headlines during the past several months, interest in the energy sector is gushing. In the first quarter of the year, investors have poured nearly $5 billion into exchange-traded funds in the equity energy Morningstar Category. Extending back six months, estimated net inflows approach the $10 billion mark. For some context, there are 24 ETFs in the category with combined assets of about $27 billion as of the end of March 2015.

The past two quarters have been the largest on record, in terms of net asset flows, by a wide margin. The timing suggests that investors are bottom-fishing after the collapse in crude-oil prices decimated the sector. Even  Royal Dutch Shell (RDS.A) has stepped in to take advantage of depressed prices, as it announced plans to acquire  BG Group (BRGYY) in a blockbuster cash-and-stock deal earlier this week.

John Gabriel does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.