After drastically underperforming the S&P 500 (^GSPC +0.54%) in 2025, energy stocks are roaring higher in 2026. Oil prices are on the rise again after hitting five-year lows in mid-December 2025, geopolitical tensions are heating up, and some investors are rotating out of growth stocks to value and dividend-focused sectors.
A good way to get general exposure to a theme or sector is through an exchange-traded fund (ETFs). Here's why the Vanguard Energy ETF (VDE 1.85%), Energy Select Sector SPDR ETF (XLE 1.96%), and the SPDR S&P 500 Oil & Gas Exploration and Production ETF (XOP 3.19%) are excellent choices for investors looking to put $2,000 to work in the energy sector.
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Two low-cost ETFs for broad sector coverage
The Vanguard Energy ETF and the Energy Select Sector SPDR ETF are almost identical. The former is run by investment management firm Vanguard, while State Street operates the Energy Select Sector ETF.
The Vanguard ETF has a slightly higher expense ratio at 0.09%, compared to 0.08% for the State Street fund. But both are lower than BlackRock's iShares U.S. Energy ETF, which is similar but charges a 0.38% expense ratio.
As for holdings, both funds are dominated by three stocks -- ExxonMobil (XOM 2.06%), Chevron (CVX 1.62%), and ConocoPhillips (COP 2.34%), which make up 44.1% of the Vanguard ETF and 48.6% of the Energy Select Sector ETF. Since the rest of their holdings outside the top three are also very similar, both funds also have nearly identical dividend yields, with 3.1% for the Vanguard ETF and 3.3% for the State Street fund.
All told, both funds are good choices for investors looking for general exposure to the U.S. energy sector, with a portfolio built around integrated majors ExxonMobil and Chevron and upstream giant ConocoPhillips.
NYSEMKT: VDE
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A bold bet on exploration and production stocks
Investors looking for more diversification and upside potential from rising oil prices may want to take a closer look at the SPDR S&P 500 Oil & Gas Exploration and Production ETF.
Although the fund targets the upstream part of the oil and gas value chain, its name is a bit misleading, as 20.2% of the fund is invested in refining and marketing companies, and 8.6% is in integrated oil and gas companies like ExxonMobil and Chevron. But still, with a concentration on exploration and production companies, the fund's share prices can be more volatile but also have more upside potential if oil prices continue to rise.
Another key difference is that the Exploration and Production ETF is far less top-heavy, with no single stock making up more than 4% of the fund. That's a stark contrast from the Vanguard Energy ETF and the Energy Select Sector SPDR ETF -- which each have over 23% weightings in ExxonMobil alone.
In this vein, the fund is a particularly good choice for investors who already own ExxonMobil and/or Chevron and are looking for an ETF that limits duplicating existing holdings.
The fund has a somewhat high expense ratio of 0.35%, and just over $2 billion in assets under management compared to $8.6 billion for the Vanguard ETF and $31.5 billion for the Energy Select Sector ETF. So it's more of a niche option for investors looking to build a more diversified portfolio focused mainly on upstream oil and gas stocks.
The ETF is also a good source of passive income, with a yield of 2.6%, which is more than double the S&P 500's 1.1% yield.
