SPDR Oil Gas ETF or Invesco Solar ETF: Which is the Smarter Energy ETF to Buy?
Key Points
The State Street SPDR S&P Oil & Gas Exploration & Production ETF gives you exposure to oil and gas producers, while the Invesco Solar ETF is a bet on the future of solar energy.
While the solar ETF has delivered higher returns over the last 12 months, the five-year picture presents a different story.
The oil and gas ETF offers a lower expense ratio than the solar ETF, making it cheaper to own.
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Energy investors often weigh the established cash flows of traditional carbon-based assets against the high-growth potential of the burgeoning renewable sector.
The State Street SPDR S&P Oil & Gas Exploration & Production ETF (NYSEMKT:XOP) and the Invesco Solar ETF (NYSEMKT:TAN) both target the broader energy theme, but they represent distinct niches within the global power landscape. One offers lower costs and broad fossil-fuel exposure, while the other provides high-growth potential in renewables.
This comparison should help investors make better decisions by examining how the two funds’ different mandates affect ownership costs, price volatility, and historical results.
Snapshot (cost & size)
| Metric | TAN | XOP |
|---|---|---|
| Issuer | Invesco | SPDR |
| Expense ratio | 0.70% | 0.35% |
| 1-yr return (as of May 20, 2026) | 82.5% | 44.9% |
| Dividend yield | None | 1.9% |
| Beta | 1.55 | 0.05 |
| AUM | $1.9 billion | $3.6 billion |
Beta measures price volatility relative to the S&P 500; beta is calculated from five-year monthly returns. The 1-yr return represents total return over the trailing 12 months. Dividend yield is the trailing-12-month distribution yield.
The State Street fund is the more affordable option, charging 0.35% annually compared to 0.7% for the Invesco fund. This lower fee structure could result in significant savings for investors maintaining long-term positions in the energy sector.
Performance & risk comparison
| Metric | TAN | XOP |
|---|---|---|
| Max drawdown (5 yr) | (74.0%) | (56.0%) |
| Growth of $1,000 over 5 years (total return) | $806 | $2,272 |
What's inside
Launched in 2006, the State Street SPDR S&P Oil & Gas Exploration & Production ETF provides targeted exposure to the oil and gas sub-industries, including integrated oil & gas, and oil & gas exploration, production, refining, and marketing. Its largest positions include SM Energy (NYSE:SM) at 3.40%, HF Sinclair (NYSE:DINO) at 3.16%, and APA (NASDAQ:APA) at 2.99%. Launched in 2006, the fund has a trailing-12-month dividend of $3.25 per share.
Launched in 2008, the Invesco Solar ETF focuses exclusively on the solar energy industry, holding 31 positions that comprise the MAC Global Solar Energy Index. Its top holdings include First Solar (NASDAQ:FSLR) at 10.28%, Enphase Energy (NASDAQ:ENPH) at 9%, and Nextpower (NASDAQ:NXT) at 8.6%.
For more guidance on ETF investing, check out the full guide at this link.
What this means for investors
The State Street SPDR S&P Oil & Gas Exploration & Production ETF is a clear pick for those who want to bet on oil and gas. But there are two important things to know.
First, this ETF focuses purely on the upstream oil and gas market, or the oil and gas producers, and not the midstream pipelines or downstream markets. Second, it uses an equal-weighted approach, which means it gives smaller and midcap independent drillers nearly as much weight as the oil giants. These two factors make the fund highly sensitive to oil and gas prices.
That said, because oil and gas companies have focused less on overspending on drilling and more on returning cash to shareholders via dividends and share buybacks in recent years, this ETF pays a dividend and offers a higher yield than the Invesco Solar ETF.
The Invesco Solar ETF is a solar pure-play, meaning it focuses on a niche within the broader clean energy sector. It is also cap-weighted, so the larger solar companies command much larger portions of the fund. It is also highly global, with a large exposure to stocks outside the U.S.
The State Street SPDR S&P Oil & Gas Exploration & Production ETF is cheaper and offers a higher yield, but you should invest in it only if you believe fossil fuels will remain indispensable and profitable for the foreseeable future. The U.S. International Energy Agency (IEA) projects oil demand to peak by 2030 and then decline gradually.
The Invesco Solar ETF gives you exposure to global solar companies. Solar energy is gaining significant momentum, driven by unprecedented power demand growth, mainly from electrification and the artificial intelligence data center boom. The IEA projects global renewables capacity to more than double by 2030, led by solar.
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Neha Chamaria has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends First Solar and Nextpower. The Motley Fool recommends Enphase Energy. The Motley Fool has a disclosure policy.
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