Five Funds That Tap Energy's Potential

3. T. Rowe Price New Era Fund

The (PRNEX)T. Rowe Price New Era fund, with $1 billion in assets under management and managed by Charles Ober since 1997, is also a natural resources fund -- energy constitutes about 60% of the portfolio these days. Ober and his staff look for undervalued stocks that they can buy and hold; the 11% turnover helps keep the expense ratio to a trim 0.72% a year. The fund's conservative approach to the sector has meant it trails some of its peers during the heady bull runs, but it has helped keep losses in check during the rough stretches -- Ober's worst year at the helm was a 9.9% loss in 1998. Schlumberger (SLB) and ExxonMobil turn up among the big holdings at the T. Rowe fund.

4. Energy Select Sector SPDR

The cheapest, purest and potentially most volatile way to tap the energy sector is through this exchange-traded fund, which is a basket of the 23 energy stocks in the S&P 500. As one might expect, the names that turn up are the well-established multinationals such as ExxonMobil, ChevronTexaco(CVX) and ConocoPhillips, which combined make up 40% of the ETF, making it a top-heavy offering. On the plus side, the fund sports an expense ratio of 0.27%. But if you want a straight market capitalization-weighted exposure to the sector and don't feel you need the expertise of an active manager (which comes at a higher price tag), this SPDR (called "Spiders") is worth a look.

5. iShares S&P Global Energy Sector Index Fund

This exchange-traded fund sports an expense ratio of 0.65%, more then double the previous option. Why consider it above the Energy Select Sector SPDR? Unlike the U.S.-only SPDR, this ETF does offer global diversification.

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