Sign up & start saving!
Our monthly newsletter is launching soon with the latest in money news, credit card offers + more ways to save
Finder is committed to editorial independence. While we receive compensation when you click links to partners, they do not influence our content.
Investing in energy stocks
Weigh the benefits and risks of investing in oil, gas, coal and natural gas.
Guides
How To Invest In
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:
- Select a platform. Explore your brokerage account options to find the platform that best matches your investment goals.
- Open an account. Most brokerage accounts can be opened online. You’ll need to fund your account before you can make trades.
- Pick your securities. Use your platform’s research tools to search for stocks and ETFs by sector.
- Place an order. Once you’ve found a security you’d like to purchase, place your order.
- Track your investments. Monitor your investments by logging into your brokerage account.
Compare online trading platforms
What stocks are in the energy sector?
- Enbridge Inc. (NYSE: ENB, TSX: ENB.TO)
- Suncor Energy Inc. (NYSE: SU, TSX: SU.TO)
- TC Energy Corporation (NYSE: TRP, TSX: TRP.TO)
- Husky Energy Inc. (TSX: HSE.TO)
- Parkland Fuel Corporation (TSX: PKI.TO)
- Canadian Natural Resources Ltd. (NYSE: CNQ, TSX: CNQ.TO)
- Imperial Oil Ltd. (TSX: IMO.TO)
- Pembina Pipeline Corporation (NYSE: PBA, TSX: PPL.TO)
- Cenovus Energy, Inc. (NYSE: CVE, TSX: CVE.TO)
- Gibson Energy (TSX: GEI.TO)
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.
More guides on Finder
-
Biden plans another boost for electric car stocks
Biden’s plan to replace the federal fleet with American-made electric vehicles gives another boost to a red-hot sector led by Tesla.
-
How to buy Mednow Inc. (MNOW) stock
Invest in this innovative virtual pharmacy and healthcare service with an online stock trading account.
-
Investing in Bitcoin: ETFs or buying outright?
SPONSORED: Bitcoin has been around for over a decade – does it really need an ETF?
-
Investing in cruise ship stocks
Cruise ship stocks are sailing through murky waters, but can they rise?
-
Investing in Chinese stocks
Pros and cons to consider before investing in Chinese stocks.
-
Investing in coal stocks
What to know before investing in this fossil fuel that’s critical to energy production.
-
Investing in car stocks
Top car stocks and ETFs that track the category.
-
The best ETFs in the US for 2021
See which US ETFs are the highest performing by revenue.
-
How to buy Deliveroo (ROO.L) stock in Canada
Canadian investors will need an international stock trading account to invest in this popular British delivery service.
-
Bitcoin vs Gold 2021: Which should you invest in?
SPONSORED: J.P. Morgan suspects Bitcoin is on its way to becoming the new gold – but should you invest?