TAN Outshines XOP in Long-Term Energy Sector Outlook
The State Street SPDR S&P Oil & Gas Exploration & Production ETF (XOP) and Invesco Solar ETF (TAN) represent two different approaches to investing in the energy sector. XOP offers lower-cost exposure to traditional energy, while TAN provides more volatile, high-conviction access to the renewable energy sector.
The cost difference between these two funds is significant, with XOP's expense ratio at 0.35% compared to TAN's 0.70%. This fee gap can impact long-term returns for investors seeking energy industry exposure. Invesco Solar ETF charges a higher premium for its thematic focus.
Looking at performance and risk, both funds have had their share of ups and downs. XOP has seen year-to-date gains of almost 42%, but this is largely due to the recent Iran war's impact on oil prices. On the other hand, TAN has returned 9.6% annualized over the past 10 years versus XOP's 4.6%. The long-term outlook for solar energy looks promising, with costs continuing to decline and demand increasing.
As a long-term investor, it makes sense to invest in the sector seeing broad-based growth in demand, rather than one whose demand base is eroding. In this case, that means TAN is the ETF to consider for long-term profits.