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How to Invest in Natural Gas ETFs [2024] | Step-by-Step

How to Invest in Natural Gas ETFs
Bogdan Stojkov

Summary: Investing in natural gas ETFs can be a lucrative venture for those looking to capitalize on the energy sector’s potential in 2024. The most convenient way to do so is through a reputable brokerage platform like eToro.

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  • Invest in 2,800+ stocks and other assets including 70+ cryptocurrencies and commodities.

  • 0% commission on buying stocks - buy in bulk or just a fraction from as little as $10. Other fees apply. For more information, visit etoro.com/trading/fees.

  • Copy top-performing traders in real time, automatically.

  • eToro USA is registered with FINRA for securities trading.

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eToro is a multi-asset investment platform. The value of your investments may go up or down. Your capital is at risk. eToro USA LLC does not offer CFDs, only real Crypto assets available. Don’t invest unless you’re prepared to lose all the money you invest.

What are natural gas ETFs?

Natural gas exchange-traded funds (ETFs) offer investors an opportunity to gain exposure to the natural gas market without directly trading commodities futures. ETFs are investment funds that are traded on stock exchanges, mirroring the performance of a specific index or commodity. In the case of natural gas ETFs, they track the price movements of natural gas.

Best natural gas ETFs for 2024

When considering natural gas ETFs, two prominent options stand out:

  • US Natural Gas (NYSE Arca: UNG);
  • SPDR S&P Oil & Gas Exploration & Production ETF (NYSE Arca: XOP).

Highly Rated Stock Trading & Investing Platform

  • Invest in 2,800+ stocks and other assets including 70+ cryptocurrencies and commodities.

  • 0% commission on buying stocks - buy in bulk or just a fraction from as little as $10. Other fees apply. For more information, visit etoro.com/trading/fees.

  • Copy top-performing traders in real time, automatically.

  • eToro USA is registered with FINRA for securities trading.

30+ million Users
eToro is a multi-asset investment platform. The value of your investments may go up or down. Your capital is at risk. eToro USA LLC does not offer CFDs, only real Crypto assets available. Don’t invest unless you’re prepared to lose all the money you invest.

US Natural Gas (UNG)

US Natural Gas is designed to track the daily price movements of natural gas. It invests in near-month natural gas futures contracts. This ETF is a straightforward way for investors to gain direct exposure to the natural gas market.

US Natural Gas price today

Your capital is at risk.


SPDR S&P Oil & Gas Exploration & Production ETF (XOP)

While not exclusively focused on natural gas, SPDR includes companies involved in oil and gas exploration and production. It provides a diversified approach to the energy sector, allowing investors to benefit from the overall performance of the industry.

SPDR S&P Oil & Gas price today

Your capital is at risk.


How to invest in natural gas ETFs: Step-by-step

If you’re looking to invest in natural gas ETFs, you can follow our simple step-by-step guide right here: 

Step 1: Choose a broker

Selecting the right broker is crucial for a successful natural gas ETF investment. As such, our go-to broker is eToro, a popular platform with a license from FinCEN and dozens of commodity ETFs, including natural gas ones.

Highly Rated Stock Trading & Investing Platform

  • Invest in 2,800+ stocks and other assets including 70+ cryptocurrencies and commodities.

  • 0% commission on buying stocks - buy in bulk or just a fraction from as little as $10. Other fees apply. For more information, visit etoro.com/trading/fees.

  • Copy top-performing traders in real time, automatically.

  • eToro USA is registered with FINRA for securities trading.

30+ million Users
eToro is a multi-asset investment platform. The value of your investments may go up or down. Your capital is at risk. eToro USA LLC does not offer CFDs, only real Crypto assets available. Don’t invest unless you’re prepared to lose all the money you invest.

Look for a platform that offers:

  • A user-friendly interface;
  • Low transaction fees;
  • Charting tools;
  • Wide range of investment options.

Step 2: Fund your account

Once you’ve chosen a broker, you should fund your newly-made investment account. This typically involves linking your bank account to your brokerage account. Nevertheless, ensure that you have sufficient funds to cover your investment, taking into account any potential fees associated with depositing or withdrawing funds.

Step 3: Research natural gas ETFs

Thorough research is key to making informed investment decisions. You should, therefore, understand the specific goals and strategies of the natural gas ETFs you’re considering. Analyze their historical performance, expense ratios, and the underlying assets they hold. Stay informed about market trends and factors affecting natural gas prices.

Step 4: Place your trade

After researching and selecting the natural gas ETF that aligns with your investment goals, it’s time to place your trade. So, log in to your brokerage account, enter the ETF symbol, specify the number of shares you want to buy, and choose the type of order (market order, limit order, etc.). Double-check your order before confirming to avoid errors.

Pros and cons of investing in natural gas ETFs

Pros

Pros

  • Diversification: Natural gas ETFs provide diversification within the energy sector, reducing risk compared to investing in individual stocks;
  • Liquidity: ETFs are traded on stock exchanges, offering liquidity that allows investors to buy and sell shares easily;
  • Cost-effective: ETFs generally have lower expense ratios compared to actively managed funds.
Cons

Cons

  • Market volatility: Natural gas prices can be volatile, impacting the performance of related ETFs;
  • Tracking error: ETFs may not perfectly replicate the performance of the underlying index, leading to tracking errors;
  • Commodity risks: As with any commodity investment, natural gas prices are influenced by factors such as supply and demand, geopolitical events, and weather conditions.

If you’re interested in investing in ETF commodities, you can check out our other guides on this topic, including:

Common mistakes when investing in natural gas ETFs

  • Neglecting research: Failing to conduct thorough research on the chosen ETFs and the natural gas market can lead to uninformed investment decisions;
  • Overlooking costs: Ignoring transaction fees, expense ratios, and other associated costs can erode your investment returns over time;
  • Short-term focus: Natural gas prices can experience short-term fluctuations. Investors should adopt a long-term perspective and avoid making decisions based solely on short-term market movements.

Disclaimer: The content on this site should not be considered investment advice. Investing is speculative. When investing, your capital is at risk.

FAQs about natural gas ETFs

Can I invest in natural gas ETFs through a retirement account?

Yes, many brokerage platforms allow you to invest in ETFs through retirement accounts like IRAs.

How do natural gas ETFs work?

Natural gas ETFs work by tracking the performance of natural gas prices, allowing investors to gain exposure to the commodity without directly trading futures contracts.

How to invest in natural gas ETFs?

To invest in natural gas ETFs, you should first choose a broker and fund your account, conduct research on specific ETFs like UNG or XOP, and then place a trade using the broker’s platform.

What are the best natural gas ETFs for 2024?

Investors should consider well-established options like US Natural Gas (UNG) and SPDR S&P Oil & Gas Exploration & Production ETF (XOP) while staying updated on market trends and new ETF offerings.

Are natural gas ETFs suitable for beginners?

Yes, natural gas ETFs can be suitable for beginners due to their simplicity and the ability to trade them like individual stocks.

How to trade natural gas ETFs?

To trade natural gas ETFs, you should choose a broker like eToro, fund your account, conduct thorough research on specific ETFs and then place your trade.

What are some natural gas ETFs to consider for 2024?

Consider US Natural Gas (UNG) for direct exposure to natural gas price movements or SPDR S&P Oil & Gas Exploration & Production ETF (XOP) for a diversified approach within the broader energy sector.

How often should I review my natural gas ETF investments?

Regularly review your investments, considering market conditions and any changes in your financial goals.

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