The Best (and Only) Natural Gas ETFs

Dear Reader,

Today, I want to talk a little bit more about the options investors have for diversifying their bets in the market. And I want to do that by talking about the best (and only) pure-play natural gas ETFs on the market. Because my research has me convinced that the future of energy is going to be kaleidoscopic. And that means there isn’t going to be one source of power but lots of them. So while investors need to keep looking at alternative energy investments, an allocation to any one of these natural gas ETFs is likely to pay off well in the long run, too.

Why Natural Gas ETFs When Fossil Fuels Are Dying?

I know what you may be thinking, though. You’ve heard all about the future of energy and you’ve been told that it doesn’t involve any fossil fuels like natural gas, oil, or coal. But the thing is you haven’t been told the whole story. But once you have, you’ll realize why these natural gas ETFs are such a great investment in your future. Because the hard, honest truth that the renewable energy crowd doesn’t want to admit is that there isn’t enough renewable energy to provide the power needs of the future. And there isn’t likely to be enough at any time in our lifetimes. But before you fossil fuel guys go celebrating, the biggest fact that industry wants to keep covered up is that there aren’t enough hydrocarbons to power the future either. They’re going to have to work together. And fossil fuels will not die off. Certainly not while any of us are still breathing.

But that’s the thing with markets. Often in the history of them, entire asset classes are given up for dead. A recent example that springs to mind is coal, which was declared all but dead by The Economist in 2020…

In the two years immediately following that fateful cover story, coal stocks shot up the charts by thousands of percent! One example is Peabody Energy (NYSE: BTU), which ran up over 2,200% in just about 24 months. That doesn’t sound dead to me…

You see, the market doesn’t care what we think or what we desire, no matter how much we wish for it. So, despite the folks over at The Economist wishing for the end of coal, the market saw a need for it and priced companies that could deliver it accordingly. The announcement of coal’s demise was one of the best times to invest in history.

And, as we already discussed, we’re hearing the same story about fossil fuels like natural gas. They’re going the way of the creatures whose remains created them. Extinction is the only future for this market and the sooner, the better. But that couldn’t be further from the truth. We NEED natural gas. Maybe one day we won’t, but today we do, and we will tomorrow and for the foreseeable future.

But with folks worried it’s going the way of the dodo, these natural gas ETFs are priced the way coal stocks were in 2020: way too low. We’re talking about near all-time lows for all of the pure-play natural gas ETFs on the market. That could provide some pretty juicy profits as investors catch on and send them the same direction coal stocks have gone.

So, now that you understand why natural gas ETFs are going to be an important part of your investor arsenal, let’s cover the best (and only) pure=play natural gas ETFs out there…

Natural Gas ETFs: USA Today, USA Forever

First up, I’ve got a double shot of natural gas ETFs for you in the form of the United States 12-Month Natural Gas Fund LP (NYSE: UNL) and the United States Natural Gas Fund LP (NYSE: UNG). Both offer investors the opportunity to bet directly on natural gas demand and its effect on prices. These natural gas ETFs accomplish that by investing in futures contracts for the commodity itself. The 12-month Fund (UNL) comprises only short-term contracts for delivery in the next 12 months. So it will have next-month contracts and contracts for the following 11 calendar months. It’s ideal for investors who see natural gas prices rising in the medium term. And for those investors who want to take a shorter-term stance, the Natural Gas Fund (UNG) offers retail access to a commodity pool where investor contributions are combined to trade futures contracts. This natural gas ETF only trades in contracts coming due next month, or front-month contracts. And that means it’s a lot more volatile than its 12-month counterpart. But when markets are experiencing imbalance, this natural gas ETF can be very effective for traders with a short-term strategy.

Natural Gas ETFs: The Other Option

And second, I’ve got the only other option out there for investors who want to place a bullish bet on the future through natural gas EFTs (I told you this was a short list). You see, for a long time, there were only two options for natural gas ETFs: the two we just covered. But now, there are technically four natural gas ETFs that are focused solely on natural gas and nothing else. We’re only covering three because one of them is structured so that investors can short the market with a natural gas ETF. But this isn’t that. This one is the ProShares Ultra Bloomberg Natural Gas Fund (NYSE: BOIL). And with a long name and a catchy symbol, it’s also among the natural gas ETFs investors need to consider. This is also among the natural gas ETFs that use futures to gain exposure. But it’s different from our first two natural gas ETFs in that it employs leverage. And what this means is that it uses various financial instruments to double the daily performance of natural gas prices.

That makes this a very potent investment as far as natural gas ETFs go. On good days, it’ll do twice as good as natural gas itself. But on bad days, it’ll do twice as poorly as natural gas. That makes it a very short-term investment tool. And it might not be a great fit for investors looking for natural gas ETFs because it’ll require daily monitoring and frequent trading. But it’s one of the few natural gas ETFs investors have as an option. And I wanted to make sure you knew all your options.

The Bottom Line on Natural Gas ETFs

The bottom line here is that investors should be paying attention to the natural gas market. They can get exposure through any of these three natural gas ETFs. But you need to keep in mind that natural gas ETFs are giving you exposure to natural gas, not the companies that produce it and profit from it. So when you’re buying natural gas ETFs, you’re betting on the price of the fuel itself.

If you’re more interested in learning about the companies producing and profiting from natural gas, though, then you need to stop looking for natural gas ETFs and start listening to your editors here at Wealth Daily and the energy experts at our sister site, Energy and Capital. You’ve already got a list of the best natural gas ETFs to buy. But coming back for more is how you’re going to find the best natural gas companies to invest in.

To your wealth,

Jason Williams

@TheReal_JayDubs

Angel Research on Youtube

After graduating Cum Laude in finance and economics, Jason designed and analyzed complex projects for the U.S. Army. He made the jump to the private sector as an investment banking analyst at Morgan Stanley, where he eventually led his own team responsible for billions of dollars in daily trading. Jason left Wall Street to found his own investment office and now shares the strategies he used and the network he built with you. Jason is the founder of Main Street Ventures, a pre-IPO investment newsletter; the founder of Future Giants, a nano cap investing service; and authors The Wealth Advisory income stock newsletter. He is also the managing editor of Wealth Daily. To learn more about Jason, click here.

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