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Our Favorite Energy ETF

Ben Johnson, CFA

Ben Johnson: Our favorite ETF for broad, diversified exposure to the energy sector is the Energy Select Sector SPDR (XLE).

XLE offers investors who are looking for energy exposure but might be wary of stock-specific risk a low-cost and liquid tool to express their view. This fund is, far and away, the largest of the eight broad-based ETFs tracking the sector. It is extremely liquid, and it has a very reasonable fee of 0.15%.

Of course, investing in the oil patch, even in the form of a diversified sector portfolio, is not for the faint of heart. We were reminded of that late last year when the price of crude oil was quickly cut in half. Today's valuations reflect the uncertainty of the future direction of energy prices.