Editor's note: Don Dion is a money manager and publisher of the Fidelity Independent Adviser family of newsletters, which provides his commentary on the financial markets, with a specific emphasis on mutual funds and exchange-traded funds.
There are many oil stock ETFs that offer investors different ways to play the oil industry, but after accounting for fees, volume and assets under management as well as comparing the portfolios, the options can be whittled down to a few best choices. Most of these ETFs are heavily tied to the oil industry and there may be significant exposure to natural gas, but I've left off energy funds that have significant exposure to coal or alternative energy.
The two smaller funds offer two different strategies. PowerShares Dynamic Energy (PXI) uses the Intellidex Index. According to PowerShares, "The Index thoroughly evaluates companies based on a variety of investment merit criteria, including fundamental growth, stock valuation, investments and risk factors. Securities shown to possess the greatest capital appreciation potential are selected by the Index."Rydex S&P Equal Weight Energy (RYE) is the other fund, which equally weights the holdings. Last fall both of these strategies underperformed the market. Since early April, when oil prices started a determined rise, they have outperformed but still lag over one- and two-year time periods. With only a small amount of assets and higher fees, the larger funds make better options.
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