5 Best Energy ETFs of 2023 by Performance

The top performers of 2023 were led by MLP ETFs.

kent
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Research Lead
Reviewed by: Mark Nacinovich
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Edited by: Kent Thune

Energy sector ETFs were top performers in 2022, as inflation surged to 40-year highs and war in Ukraine caused oil supply disruptions. 

But 2023 was a different story, as demand slipped with slowing global economies and income-seeking investors fled from dividend-paying stocks and into higher-yielding Treasuries

The best energy ETFs of 2023 were mostly those investing in master limited partnerships, or MLPs, which are specialized business structures known for high income distributions and energy sector focus.  

See our list of top-performing energy ETFs of the year, including a primer on how these funds work, as well as their potential benefits and risks.

What Is an Energy ETF? 

An energy ETF is a type of investment exchange-traded fund that focuses on companies in the energy sector, such as those involved in oil, gas, coal and renewable energy. The typical energy ETF is designed to track the performance of a specific energy-related index or benchmark, and its value is determined by the combined performance of the underlying stocks held in the fund. 

Energy ETFs provide investors with a way to gain exposure to the energy sector without having to buy individual stocks. They offer a diversified portfolio of energy-related securities, which can help to reduce investment risk. Energy ETFs can also provide investors with the potential for long-term growth, as well as current income, as many energy companies pay dividends to their shareholders. 

Best Energy ETFs of 2023 

The best energy ETFs of 2023 were dominated by funds investing in MLPs, which are business structures that combine the tax benefits of a limited partnership with the liquidity of publicly traded securities and typically producing high dividend yields. MLPs are common in the energy sector, particularly in the midstream segment, which involves the transportation, storage and processing of energy commodities.

5 Best Energy ETFs of 2023 Based on Performance

TickerFundAUMYieldYTD Return
AMZAInfraCap MLP ETF$355.9M9.21%29.39%
AMLPAlerian MLP ETF$7.5B5.62%25.82%
MLPAGlobal X MLP ETF$1.5B7.84%20.67%
MLPXGlobal X MLP & Energy Infrastructure ETF$999.2M5.84%16.56%
EINCVanEck Energy Income ETF$29.1M4.16%16.06%

Data as of November 30, 2023. ETNs and leveraged ETFs were not included in our search. Past performance is no guarantee of future results.

Benefits and Risks of Investing in Energy ETFs 

There are many potential benefits of investing in energy ETFs, such as potential for long-term growth and current income. However, before buying shares, investors should weigh the associated risks, such as concentration risk and political and regulatory risk. 

Benefits of Investing in Energy ETFs 

  • Diversification: Energy ETFs invest in a broad range of energy companies, which can help to reduce investment risk by diversifying across multiple companies and subsectors within the energy industry. 
  • Potential for long-term growth: Energy ETFs may offer investors exposure to the potential for long-term growth in the energy sector, which is driven by global demand for energy and the development of new technologies. 
  • Source of income: Many energy ETFs, especially the large caps, pay dividends, which can provide a source of income for investors. 
  • Access to specific energy subsectors: Some energy ETFs are designed to track specific subsectors of the energy industry, such as renewable energy, or oil and gas exploration and production. This can provide investors with targeted exposure to a specific area of the energy market. 
  • Liquidity: Energy ETFs are traded on stock exchanges, which means they can be bought and sold easily throughout the trading day. 

Risks of Investing in Energy ETFs 

  • Volatility: The energy industry can be volatile, with fluctuations in energy prices and changes in government policies and regulations affecting the performance of energy companies. This can result in high levels of volatility for energy ETFs. 
  • Concentration risk: Some energy ETFs may be heavily concentrated in a particular subsector of the energy industry or in a few large companies, which can increase the risk of losses if that subsector or company performs poorly. 
  • Political and regulatory risks: Energy companies can be affected by changes in government policies and regulations, which can affect their profitability and stock prices. 
  • Environmental risks: Some energy companies may face environmental risks, such as the potential for oil spills or environmental damage from coal mining. These risks can impact the financial performance of the companies and the ETFs that hold their stocks. 

Types of Energy ETFs 

There are several types of energy ETFs, which vary in terms of the companies and subsectors they invest in. Here are some of the most common types of energy ETFs: 

Bottom Line on the Best Energy ETFs

The best energy ETFs of 2023 were led by funds investing in MLPs, but there are many other types of energy ETFs for investors to choose from, offering investors several benefits, including current income and the potential for long-term growth.

It's important to note that the performance of energy ETFs can be affected by a range of factors, including oil prices, global demand for energy and government policies and regulations. Therefore, investors should carefully consider their investment goals and risk tolerance before investing.

Kent Thune is Research Lead for etf.com, focusing on educational content, thought leadership, content management and search engine optimization. Before joining etf.com, he wrote for numerous investment websites, including Seeking Alpha and Kiplinger. 

Kent holds a Master of Business Administration (MBA) degree and is a practicing Certified Financial Planner (CFP®) with 25 years of experience managing investments, guiding clients through some of the worst economic and market environments in U.S. history. He has also served as an adjunct professor, teaching classes for The College of Charleston and Trident Technical College on the topics of retirement planning, business finance, and entrepreneurship. 

Kent founded a registered investment advisory firm in 2006 and is based in Hilton Head Island, SC, where he lives with his wife and two sons. Outside of work, Kent enjoys spending time with his family, playing guitar, and working on his philosophy book, which he plans to publish in the coming year.