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Investing in energy stocks

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

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 two 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.

What stocks are in the energy sector?

See how the following stocks are performing, and view details like market capitalization, the price-to-earnings (P/E) ratio, price/earnings-to-growth (PEG) ratio and dividend yield.

What ETFs track the energy sector?

Popular ETFs in the energy sector include:

Compare solar energy stocks

How is the energy sector performing?

The stock market is in constant flux, and individual stocks can change prices second by second. But you can use the performance of ETFs to gauge the average performance of a stock market sector over time. The graph below tracks the Energy Select Sector SPDR ETF (XLE).

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.

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.

Compare stock trading platforms

1 - 6 of 6
Name Product Ratings Available asset types Minimum deposit Stock trade fee Cash sweep APY Signup bonus
SoFi Invest®
Finder Score: 4.2 / 5: ★★★★★
SoFi Invest®
★★★★★
Stocks, Mutual funds, ETFs, Alternatives
$0
$0
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Tastytrade
Finder Score: 4.6 / 5: ★★★★★
Tastytrade
★★★★★
Stocks, Options, ETFs, Cryptocurrency, Futures, Treasury Bills
$0
$0
N/A
Get $100-$5,000
when you open and fund an account with $5,000 to $1,000,000+
Highly commended for Best Derivatives Trading Platform award.
Public.com
Finder Score: 4.1 / 5: ★★★★★
Public.com
★★★★★
Stocks, ETFs, Cryptocurrency, Art, Treasury Bills, Collectibles
$0
$0
5.1%
N/A
2.5% fee applies to all alternative asset transactions.
Robinhood Gold
Finder Score: 4.3 / 5: ★★★★★
Robinhood Gold
★★★★★
Stocks, Options, ETFs, Cryptocurrency
$0
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5%
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Try Robinhood Gold for 30 days risk-free upon signup and earn a 5% APY on your uninvested cash, a 3% match on IRA contributions, up to $50,000 in instant deposits and more. Accounts are auto-downgraded after the trial period.
Moomoo
Finder Score: 4.7 / 5: ★★★★★
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Stocks, Options, ETFs
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Robinhood
Finder Score: 4.3 / 5: ★★★★★
Robinhood
★★★★★
Stocks, Options, ETFs, Cryptocurrency
$0
$0
1.5%, or 5% with Robinhood Gold
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Try Robinhood Gold for 30 days risk-free upon signup and earn a 5% APY on your uninvested cash, a 3% match on IRA contributions, up to $50,000 in instant deposits and more. Accounts are auto-downgraded after the trial period.
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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

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Finder is not an adviser or brokerage service. Information on this page is for educational purposes only and not a recommendation to invest with any one company, trade specific stocks or fund specific investments. All editorial opinions are our own.

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