Want to pocket some of the profits of Big Oil companies like Exxon Mobil (XOM) and Chevron (CVX) for yourself? Energy exchange-traded funds (ETFs) are among the best and easiest ways to do that—and a whole lot more.
As a general rule, beginner investors don’t need a boatload of different funds in their portfolios. A few core index funds can help anchor your account and build the wealth you want over time. But as you start to get a little more acclimated (and interested in the investing world), you might decide you want to become a little more active—and augment your core holdings with a few “satellite” holdings.
Satellite holdings try to provide a little something extra: performance, income, safety, you name it. They can be individual stocks, but if you want to spread out your risk, you’re better off investing in funds. And one popular type of satellite fund is the sector fund—funds that hold nothing but stocks in a single sector, such as technology, health care, or, in this case, energy.
When people think of the energy sector, they typically think of companies that pull oil or gas out of the ground. And yes, those are energy companies. But there are many other types of energy stocks—firms that transport energy commodities, firms that refine oil and gas into consumer products like gasoline, even firms that work in alternative energy sources such as solar and wind. Because of this, energy can meet several needs—for instance, it can provide high dividend yields to longer-term investors, and it can be a great source of gains for shorter-term traders.
And energy ETFs allow you to enjoy all sorts of different types of exposure to this sector.
Today, I’m going to help you get acclimated by introducing you to three energy ETFs for beginner investors that have three very different investment flavors. Should you buy all three? Almost certainly not. But it’s likely that, if you want to add energy to your portfolio, at least one of these three funds will help you do that in a way that lines up with your other investment goals.
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3 Beginner ETFs—Quick Stats
| ETF | Ticker | Assets | Dividend Yield | Expenses | # of Holdings | Top 3 Holdings |
|---|---|---|---|---|---|---|
| Energy Select Sector SPDR Fund | XLE | $40.6 billion | 2.6% | 0.08% | 21 | Exxon Mobil (XOM), Chevron (CVX), ConocoPhillips (COP) |
| SPDR S&P Kensho Clean Power ETF | CNRG | $189.6 million | 1.3% | 0.45% | 40 | Arcosa (ACA), Constellation Energy (CEG), FuelCell Energy (FCEL) |
| JPMorgan Alerian MLP ETN | AMJB | $873.2 million | 5.4% | 0.85% | 14 | Sunoco LP (SUN), Energy Transfer LP (ET), Plains All American Pipeline LP (PAA) |
| All data is as of 8/29/26 | ||||||
My Look at 3 Top Beginner Energy ETFs
I picked the following three energy ETFs because they offer three different flavors for beginners looking to dip a toe into the sector. And they share many common elements of the best ETFs for beginners, including lower-than-average fees and straightforward investing goals.
I’ll look at what these funds are, what they hold, and some details about them that could make a difference in your decision to buy.
1. State Street Energy Select Sector SPDR ETF
- Assets under management: $40.6 billion
- Dividend yield: 2.6%
- Expense ratio: 0.08%, or 80¢ annually on a $1,000 investment
What is XLE?
The State Street Energy Select Sector SPDR ETF (XLE) is the largest energy sector ETF by a country mile—it commands well more than three times more assets than the second-largest broad energy ETF, the Vanguard Energy ETF (VDE). It’s also been around for more than a quarter of a century, going live in 1998.
This cheap, simple index fund provides extremely basic exposure to energy (primarily oil and gas) for investors who don’t want to go stock-picking in the sector.
What does XLE hold?
The XLE holds all of the energy-sector stocks in the S&P 500, which at the moment is 21. But not all energy companies are in the same kind of business.
Top holdings Exxon and Chevron are called “integrated” companies, meaning they span upstream (exploration and production), midstream (transportation and storage), and downstream (refining, distributing, and retail). Some holdings are only engaged in one or two “streams”—Phillips 66 (PSX), for instance, doesn’t engage in extracting oil or gas, but it does refine, transport, store, and sell energy products. (Have you seen a Phillips 66 gas station? That’s part of their retail unit.)
What else should you know about XLE?
Here’s a term every beginner investor should know: “cap-weighted.”
Cap-weighted is short for “market capitalization-weighted,” which means that the bigger the stock, the more assets a fund dedicates to that stock. Exxon, at $650 billion in market capitalization, is the largest stock XLE holds—and it also enjoys the largest “weight,” at 20% of XLE’s assets. By comparison, $14 billion APA Corp. (APA) accounts for a mere 0.9%.
Why does that matter? The more of a fund’s assets a stock commands, the more effect its performance has on the fund’s performance. So when you consider Exxon’s weight, along with the fact that Chevron commands another 15% of assets, that means just two stocks—XOM and CVX—are responsible for more than 35% of XLE’s returns! This is called “concentration risk,” and it’s something you need to think about whenever you own a fund. If you already own Exxon and Chevron, for instance, buying this SPDR energy ETF puts even more weight on those two stocks’ shoulders.
APA, in the meantime, represents less than 1%. So even a very big move from APA might not be noticeable in XLE’s performance.
That doesn’t necessarily mean State Street Energy Select Sector SPDR ETF is bad. XLE is different from many other funds in that most of its holdings are extremely sensitive to one factor: changes in commodity prices. That means if XOM moves, chances are that ConocoPhillips (COP), EOG Resources (EOG), and all of XLE’s other holdings are moving in a similar direction. Even if the fund’s assets were more evenly distributed, it might not make all that much of a difference. So despite XLE being extremely imbalanced, it remains an effective way to get exposure to the energy sector.
One last note: Dividends from the energy sector are much higher than the market as a whole. XLE often yields more than 3%, but that’s “down” to the mid-2% area because of energy’s gains in 2026. Of course, that’s still more than double the 1% offered up by the S&P 500.
Want to learn more about XLE? Check out the State Street Investment Management provider site.
Related: 5 Dandy Dividend-Growth ETFs to Buy Now
2. State Street SPDR S&P Kensho Clean Power ETF
- Assets under management: $189.6 million
- Dividend yield: 1.3%
- Expense ratio: 0.45%, or $4.50 annually on a $1,000 investment
What is CNRG?
Some investors want more than old, dirty energy—they want new, cleaner energy. And that’s what the State Street SPDR S&P Kensho Clean Power ETF (CNRG) is designed to provide. The clean energy types CNRG targets includes solar, wind, hydroelectric, and geothermal.
CNRG does this by tracking the S&P Kensho Clean Power Index, which itself holds components from two Kensho indexes—the S&P Kensho Cleantech Index and the S&P Kensho Clean Energy Index.
What does CNRG hold?
By tracking two indexes, CNRG provides two somewhat different types of clean-energy exposure within the same fund:
- The S&P Kensho Cleantech Index is made up of companies that “offer products and services related to manufacturing the technology for renewable energy.”
- The S&P Kensho Clean Energy Index is made up of companies that “offer products and services related to renewable energy.”
They sound really similar, but they’re not at all the same.
The “Cleantech” holdings include companies like Bloom Energy (BE) and GE Vernova (GE) that provide technology in and around clean energy. Bloom Energy produces fuel cells that produce electricity onsite in places like data centers and factories, while GE Vernova produces, among other things, wind turbines for wind energy and aerating turbines for hydroelectric energy.
The “Clean Energy” holdings, for the most part, actually produce the clean energy. For instance, NextEra Energy (NEE), through its NextEra Energy Resources subsidiary, is the world’s largest generator of renewable energy from wind and solar.
CNRG currently owns 39 stocks. The SPDR S&P Kensho Clean Power ETF uses a quantitative weighting methodology that ensures the biggest companies don’t dictate the fund’s performance. No component accounts for more than 4% of assets right now.
Also, because of the fund’s split focus between higher-yielding sectors such as utilities and energy, and “growthier” sectors like technology and industrials, CNRG offers some growth potential and some income potential—but not necessarily a high amount of either.
What else should you know about CNRG?
The SPDR S&P Kensho Clean Power ETF uses a quantitative weighting methodology that ensures the biggest companies don’t dictate the fund’s performance. CNRG’s top holding, Constellation Energy (CEG), accounts for just a little more than 4% of assets; no other holding accounts for more than 4% right now.
Also, because of CNRG’s split focus between higher-yielding sectors such as utilities and energy, and “growthier” sectors like technology and industrials, CNRG offers some growth potential and some income potential—but not necessarily a high amount of either.
All in all, CNRG offers a creative and diversified way for beginner investors to access clean energy stocks.
Want to learn more about CNRG? Check out the State Street Investment Management provider site.
Related: 3 Best Utility ETFs You Can Buy Right Now
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3. JPMorgan Alerian MLP ETN
- Assets under management: $873.2 million
- Dividend yield: 5.4%
- Expense ratio: 0.85%, or $8.50 annually on a $1,000 investment
What is AMJB?
The JPMorgan Alerian MLP ETN (AMJB) is an ETF-like fund (more on that in a bit) dedicated to providing access to one small slice of the sector pie: energy master limited partnerships (MLPs).
Master limited partnerships aren’t a type of energy company—they’re an overall business structure that’s applicable to numerous industries. They’re considered “pass-through entities” because income isn’t taxed at the corporate level—it’s “passed through” to owners and “unitholders” (the MLP equivalent of shareholders) via “distributions” (the MLP equivalent of dividends). MLPs can trade publicly just like regular companies, but they also provide some special tax perks because of the nature of these distributions, which we’ll also get to in a moment.
The JPMorgan Alerian MLP ETN provides exposure to a very specific subset of master limited partnerships—energy MLPs, which typically involve energy’s “midstream”: pipelines, terminals, and storage.
What does AMJ hold?
Technically speaking, AMJB doesn’t hold anything … but again, we’ll get to that in a second.
AMJB tracks the Alerian MLP Index, which is made up of just 14 publicly traded energy MLPs. This is an extremely tight portfolio. Top “holdings” include the likes of Sunoco LP (SUN), Energy Transfer LP (ET), and Plains All American Pipeline LP (PAA), which collectively boast tens of thousands of miles of pipelines, as well as storage facilities, processing plants, and other midstream energy assets.
What else should you know about AMJ?
I think AMJB is one of the best ways to invest in MLPs, but its, er, plumbing is far from straightforward.
AMJB isn’t an ETF—it’s technically an exchange-traded note (ETN). In extremely oversimplified terms, an exchange-traded note is actually a debt security bundled up in an ETF wrapper. It replicates an index’s performance, but it doesn’t actually hold anything. You’ll still enjoy returns if the companies in AMJB head higher (or losses if their prices decline), and you’ll still be paid dividends. But there is an added risk: If the company issuing the underlying debt (in this case, JPMorgan) gets into extreme financial trouble, the fund could suffer even if its underlying index performs well.
Funnily, for as complex as all that sounds, you buy and sell ETNs just like you would an ETF. Your brokerage account experience will be exactly the same.
But why take on that additional risk? Why not just own master limited partnerships outright, or own an MLP ETF?
Well, MLPs tend to generate far-above-average (and even tax-advantaged) income, but they also generate far-above-average tax headaches. MLP distributions are primarily made up of tax-deferred return of capital, with the remainder typically considered ordinary income. MLPs even require an additional form—the K-1—come tax time. MLP funds like the popular Alerian MLP ETF (AMLP) cure one of those headaches by providing a 1099 instead of a K-1, but you still have to deal with the split of return of capital and ordinary income.
AMJB issues a 1099, not a K-1. And it simply distributes all of its income in the form of a quarterly coupon. That coupon is treated as ordinary income—taxed at your marginal rate, not the lower capital-gains tax rate reserved for long-term investments and qualified dividends. You also don’t get quite the same amount of yield as you would from AMLP. However, you can avoid taxation on the coupon payments by owning AMJB in a tax-deferred account like an IRA.
Why not do the same with traditional MLP ETFs? You can, but watch out. Distributions from MLPs are considered unrelated business taxable income (UBTI), and a tax-deferred account is allowed a deduction of up to $1,000 in UBTI. Above that threshold, the income is taxable as ordinary income. AMJB’s distributions, while linked to the distributions paid by the Alerian MLP Index’s constituents, are technically coupon payments and not subject to UBTI rules.
Want to learn more about AMJB? Check out JPMorgan’s provider site.
Related: Dividend Kings: The Full List of American Dividend Royalty
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