Better Energy Sector ETF: Vanguard's VDE Targeting Traditional Oil and Gas Giants vs. Invesco's Solar-Focused TAN
Key Points
The Vanguard Energy ETF provides broad, low-cost exposure to the traditional energy sector compared to the higher fees of the Invesco Solar ETF.
The Invesco Solar ETF focuses exclusively on solar energy companies, resulting in significantly higher volatility and a much deeper historical drawdown.
The Vanguard Energy ETF has delivered much stronger 5-year total returns and maintains a significantly larger pool of assets under management (AUM).
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The Vanguard Energy ETF (NYSEMKT:VDE) offers broad, low-cost exposure to traditional fossil fuel companies, while the Invesco Solar ETF (NYSEMKT:TAN) provides a high-conviction, specialized bet on the global solar power industry.
Energy investing is not a monolith. While the Vanguard fund tracks a broad basket of traditional U.S. energy producers, the Invesco fund targets a specific, high-growth renewable niche. Comparing these two funds highlights the massive trade-offs between diversified fossil-fuel exposure and the high-volatility, thematic world of solar technology.
Snapshot (cost & size)
| Metric | TAN | VDE |
|---|---|---|
| Issuer | Invesco | Vanguard |
| Share price | $45.66 (as of 2026-09-18) | $180.31 (as of 2026-09-18) |
| Expense ratio | 0.7% | 0.09% |
| 1-yr return (as of 2026-09-18) | 6.7% | 46.8% |
| Dividend yield | n/a | 2.3% |
| Beta | 1.41 | 0.50 |
| AUM | $0.9 billion | $13.2 billion |
Beta measures price volatility relative to the S&P 500; beta is calculated from monthly returns over the available fund history (up to five years). The 1-year return represents total return over the trailing 12 months. Dividend yield is the trailing-12-month distribution yield.
Cost is a primary differentiator for long-term holders. The Vanguard fund's 0.09% expense ratio is significantly more affordable than the 0.7% charged by the Invesco fund, which reflects the higher costs often associated with managing specialized, niche thematic portfolios.
Performance & risk comparison
| Metric | TAN | VDE |
|---|---|---|
| Max drawdown (5 yr) | (74.0%) | (26.6%) |
| Growth of $1,000 over 5 years (total return) | $539 | $3,085 |
What's inside
The Vanguard Energy ETF holds 112 stocks and tracks a broad U.S. energy index, resulting in 100% sector concentration in energy. Its largest positions include ExxonMobil Holdings at 21.90%, Chevron at 14.08%, and ConocoPhillips at 6.01%. This broad approach provides exposure to integrated oil majors and exploration companies. The fund was launched in 2004.
The Invesco Solar ETF maintains a tighter portfolio of 35 holdings, focusing on companies in the solar industry across energy (56%), utilities (31%), and industrials (5%). This concentration means the fund is sensitive to specific regulatory and technological shifts. Its largest positions include First Solar at 9.81%, Nextpower at 8.84%, and Enlight Renewable Energy at 8.19%. The fund was launched in 2008.
For more guidance on ETF investing, check out the full guide at this link.
Which looks like the better buy
The energy sector is going through massive upheaval in 2026. The U.S. war with Iran has caused oil prices to soar, while the artificial intelligence boom has created enormous demand for electricity. These factors make energy ETFs an excellent way to efficiently invest in the industry. The Vanguard Energy ETF (VDE) and the Invesco Solar ETF (TAN) provide investors with very different approaches to doing so.
VDE has benefited from both the AI trend and the conflict in the Middle East, delivering a spectacular one-year return of nearly 50%. Its recent performance isn't the only reason to invest. It offers a robust dividend yield, a low beta, and a high AUM for superior liquidity. Combined with its low expense ratio, VDE is ideal for investors who want to hold for the long term.
TAN is for those seeking to invest in the renewable energy sector, or who prefer not to contribute funds to traditional fossil fuel companies. In addition, the arrival of AI signals long-term growth potential for TAN, since many of the tech companies spending on AI prefer clean energy alternatives for electricity generation. If you believe the AI-driven demand for energy can boost TAN's growth over the long haul, now is a good time to invest, given the ETF trades near its 52-week low.
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Robert Izquierdo has positions in First Solar. The Motley Fool has positions in and recommends Chevron, First Solar, and Nextpower. The Motley Fool recommends ConocoPhillips. The Motley Fool has a disclosure policy.
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