Invest in Natural Gas with ETFs

Gas flame, close-up
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Natural gas ETFs are funds that track the price of natural gas, which seems simple in theory, but not in execution.

Key Takeaways

  • Natural gas ETFs track the price of natural gas. Two types of energy ETFs correlate: commodity funds and industry funds.
  • Another way to give your portfolio exposure to natural gas is to invest in an industry ETF that tracks companies involved in the exploration and production of natural gas.
  • Watch how these ETFs interact with market conditions, look at their quote history, and even take a look under the hood and see what is in the fund.

Types of Energy ETFs

Two types of energy ETFs exist, and they correlate to the price of natural gas. Some are commodity ETFs that track the price of a natural gas (or related index) by utilizing derivatives such as futures in their construction. And while these types of energy funds have been under scrutiny, they can't be ignored.

UNG, the United States Natural Gas ETF is a prime example of an energy ETF that aims to track the price of natural gas, but where the accuracy of the fund’s ability to emulate the price of the commodity has been controversial in the past. Commodity futures are closely monitored by regulatory agencies, who periodically pass regulations regarding commodity futures and their availability.

A slightly less direct way to give your portfolio exposure to natural gas is to invest in an industry ETF that tracks companies involved in the exploration and production of natural gas. A perfect example of this type of fund is the SPDR S&P Oil & Gas Exploration & Production ETF (XOP).

Some of the holdings in WCAT are Diamondback Energy Inc. (FANG) and Cabot Oil & Gas Corporation (COG). Companies with profits tied to natural gas.

So whether you want to invest in a fund that is tied to the natural gas as a commodity or the natural gas industry instead, there are a decent amount of funds to select. And to help you with your research, they're listed here so you can see which fund is the best fit for your investment strategy.

Natural Gas ETFs and ETNs

  • BOIL - ProShares Ultra Bloomberg Natural Gas ETF
  • KOLD - Ultra Short Bloomberg Natural Gas ETF
  • DDG - ProShares Short Oil and Gas ETF
  • DRIP - Direxion Daily S&P Oil & Gas Exp. & Prod. Bear 2X Shares ETF
  • GUSH - Direxion Daily S&P Oil & Gas Exp. & Prod. Bull 2X Shares ETF
  • FCG – First Trust Natural Gas ETF
  • FRAK - VanEck Vectors Unconventional Oil & Gas ETF
  • FTXN - First Trust Nasdaq Oil & Gas ETF
  • GAZ – iPath Series B Bloomberg Natural Gas Subindex Total ReturnSM ETN
  • UNG – United States Natural Gas Fund ETF

These are the current natural gas ETF that are available to trade on today's exchanges. However over time as new funds are introduced or if any stop trading, I will be back to update this list. So you may want to check in now and again if the natural gas sector is part of your investing strategy. There may be new opportunities.

And while these funds may seem attractive, they are not without risk. So as you go through this list, be sure to investigate each fund closely. Watch how they interact with market conditions, look at their quote history and even take a look under the hood and see what is in the fund.

Many leveraged and inverse fund contain derivatives such as options and futures to achieve their goals, so it's important to understand how they work. Know your risk and be sure to ask for professional guidance if needed.