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Investing in energy stocks

Weigh the benefits and risks of investing in oil, gas, coal and natural gas.

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Shannon Terrell
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Sector-specific investing can help you broaden and diversify your portfolio. But each sector comes with a unique assortment of benefits and risks.

What are energy stocks?

Energy stocks fit into the energy sector of the stock market — one of 11 sectors defined by the Global Industry Classification Standard (GICS). Companies in the energy sector focus on the location, mining and production of oil, coal and natural gas.

What subcategories are included in this sector?

Companies that fall within the energy sector can be sorted into the following subcategories:

  • Oil and gas. At the start of the supply chain, we find companies responsible for drilling and producing oil and natural gas.
  • Pipelines. These mid-stream providers transport oil and natural gas from the drilling site to their respective refineries.
  • Mining. Mining companies produce coal that helps fuel power plants.
  • Renewable energy. Those that produce wind and solar energy are considered renewable energy providers.
  • Chemicals. This subcategory is comprised of companies responsible for refining oil and gas into specialty chemicals.

How to invest in the energy sector

There are 2 ways to invest in the energy sector: individual stocks or exchange-traded funds. Individual stocks are highly liquid but offer limited exposure. Sector-tracking ETFs are less risky than stocks and offer portfolio diversification but typically pay lower dividends and have higher fees.

You’ll need a brokerage account to invest in stocks and ETFs. Here’s a quick look at the process:

  1. Select a platform. Explore your brokerage account options to find the platform that best matches your investment goals.
  2. Open an account. Most brokerage accounts can be opened online. You’ll need to fund your account before you can make trades.
  3. Pick your securities. Use your platform’s research tools to search for stocks and ETFs by sector.
  4. Place an order. Once you’ve found a security you’d like to purchase, place your order.
  5. Track your investments. Monitor your investments by logging into your brokerage account.

Compare online trading platforms

Name Product Available Asset Types Stock Fee Option Fee Account Fee ETF Transaction Cost Feature Table description
Wealthsimple Trade
OFFER
Wealthsimple Trade
Stocks, ETFs
$0
N/A
$0
Free
Get 2 free stocks when you open a Wealthsimple Trade personal account and deposit and trade at least $150.
Pay no commissions when you trade Canadian stocks and ETFs with Wealthsimple Trade.
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More Info
Interactive Brokers
Interactive Brokers
Stocks, Bonds, Options, ETFs, Currencies, Futures
Min. $1.00, Max. 0.5% of trade value
$1.50 min. per order
$0
Min. $1.00, Max. 0.5% of trade value
Extensive trading capabilities and global investment tracking.
Access market data 24 hours a day, six days a week and invest in global stocks, options, futures, currencies, bonds and funds from one single account.
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BMO InvestorLine
BMO InvestorLine
Stocks, Bonds, Options, Mutual Funds, ETFs, GICs
$9.95
$9.95 + $1.25 per options contract
$0 if conditions met, otherwise $25/quarter
$0 - $9.95
Buy and sell a select group of Canada’s most popular ETFs without paying commissions.
An easy-to-use online trading platform with access to research, tools, and the option to access InvestorLine adviceDirect for additional professional support.
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More Info
Scotia iTRADE
Scotia iTRADE
Bonds, Options, Mutual Funds, ETFs, GICs, International Equities
$4.99-$9.99
$9.99 + $1.25 contract ($4.99 + $1.25 contract if completed 150 trades or more a quarter)
$0
$9.99 ($4.99 if completed 150 trades or more a quarter)
Pay no annual account fees.
Buy, sell and trade ETFs, Equities, Options and more with competitive commissions.
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CIBC Investor's Edge
CIBC Investor's Edge
Stocks, Bonds, Options, Mutual Funds, ETFs
$4.95 - $6.95
$4.95 - $6.95 (+$1.25 per contract)
$0 if conditions met, otherwise $100/year
$6.95
$4.95 - $6.95 is applicable for online stock, ETF and option trades only. Pay $4.95 when you qualify as an Active Trader (trade 150+ times per quarter).
An intuitive and easy-to-use platform with access to a variety of tools that help you make smart decisions and trade with confidence.
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More Info
Questrade
Questrade
Stocks, Bonds, Options, Mutual Funds, ETFs, GICs, International Equities, Precious Metals
$4.95-$9.95
$9.95 + $1 per contract
$0
Free
Get $50 in free trades when you fund your account with a minimum of $1,000.
Opt for self-directed investing and save on fees or get a pre-built portfolio and take some of the guesswork out.
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More Info
Qtrade Direct Investing
OFFER
Qtrade Direct Investing
Stocks, Bonds, Options, Mutual Funds, ETFs, GICs
$6.95 - $8.75
$6.95 - $8.75 + $1.25 per contract
$0 if conditions met, otherwise $25/quarter
$0 - $8.75
Get up to 50 free trades. Be one of the first 100 new Qtrade clients to use the promo code 50FREETRADES and deposit a minimum of $10,000 (or top up to $15,000 to get $150 transfer fees waived). Valid until December 31, 2021.
Qtrade Direct Investing offers low trading commissions and an easy-to-use platform with access to powerful tools and a wide selection of investment options. Trade 100 ETFs free of charge and thousands more for $8.75 or lower.
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Compare up to 4 providers

Name Product Minimum deposit to invest Funding methods Management fee Available Asset Types
Wealthsimple Invest
OFFER
Wealthsimple Invest
$1
Direct deposit, Bank transfer
0.40% - 0.50%
Stocks
Get a $50 bonus when you open and deposit $500 in your account. Trade and Cash accounts are not eligible.
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More Info
Questwealth Portfolios
Questwealth Portfolios
$1
Direct deposit, Bank transfer
0.20% - 0.25%
Stocks, Bonds, ETFs, Commodities
A robo-advisor offering low fee portfolios that are actively managed and dynamically rebalanced when market conditions change.
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More Info
Moka
Moka
$0
Automatic bank withdrawals
$3/month
ETFs
The Moka app rounds up every purchase you make to the nearest dollar and invests the spare change into low-cost exchange-traded funds (ETFs).
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More Info
Justwealth
OFFER
Justwealth
$5,000
Direct deposit, Bank transfer, Automatic bank withdrawals
0.50%
ETFs
Receive a cash bonus of $50.00-$500.00 when you open a new Justwealth account. RESP accounts require no minimum deposit to begin investing.
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More Info
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Compare up to 4 providers

Name Product Minimum Opening Deposit Commission Available Markets Platforms
Blackbull Markets
Blackbull Markets
US$200
$0 - $6.00 R/T per Lot
Forex
Metals
Commodities
MetaTrader 4
CFDs are leveraged products which involves greater risk than using cash resources only. You could lose all or more of your initial investment. Trade forex, CFDs and commodities with Blackbull Markets.
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More Info
Forex.com
Forex.com
US$100
Minimum US$25
Forex
Metals
Commodities
Indices
Shares
Forex.com Desktop, Forex.com Web Trading, Forex.com Mobile Trading, MetaTrader 4
CFDs are leveraged products which involves greater risk than using cash resources only. You could lose all or more of your initial investment. Trade 80+ currency pairs and 220+ CFDs in equities, commodities and indices on Forex.com.
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What stocks are in the energy sector?

What ETFs track the energy sector?

Popular ETFs in the energy sector include:

  • Energy Select Sector SPDR (XLE)
  • Vanguard Energy ETF (VDE)
  • iShares Global Energy ETF (IXC)
  • VanEck Vectors Oil Services ETF (OIH)
  • iShares U.S. Energy ETF (IYE)
  • Alerian MLP ETF (AMLP)

Why invest in energy stocks?

Energy is a resource the world depends on. The energy market is massive, and for good reason — this resource has been in high demand for many years. And even accounting for the shift towards clean energy, the world is still decades away from being free from oil, coal and gas.

Profitability in the energy sector is largely tied to the price of crude oil, but stock prices are typically stable and frequently pay dividends. Income from energy stocks may also be tax-sheltered — an attractive incentive for investors.

How to invest in oil in Canada

What unique risks does the energy sector face?

Politics play a sizable role in the energy sector. If companies explore for energy resources in unstable territories, projects are at risk of being sidelined or halted in the face of political turmoil.

Incorrect geological reports, oil spills and accidents can be costly for investors. This sector isn’t without its risks and investors should weigh the benefits against the drawbacks before allocating funds.

Bottom line

The energy sector offers the opportunity for profit but carries a unique set of risks. The best way to invest depends on your portfolio and your investment goals. Review your trading platform options to find the brokerage account that best meets your needs.

Frequently asked questions

Disclaimer: This information should not be interpreted as an endorsement of futures, stocks, ETFs, CFDs, options or any specific provider, service or offering. It should not be relied upon as investment advice or construed as providing recommendations of any kind. Futures, stocks, ETFs and options trading involves substantial risk of loss and therefore are not appropriate for all investors. Trading CFDs and forex on leverage comes with a higher risk of losing money rapidly. Past performance is not an indication of future results. Consider your own circumstances, and obtain your own advice, before making any trades.

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