Investors looking to capitalize on the energy transition fully should consider pairing traditional fossil fuel funds with renewable energy ETFs.

Investors may be able to diversify their portfolios and maximize potential upside by allocating to investments in fossil fuels, such as crude oil and natural gas, as well as investments in renewable energy sources, such as wind, solar, and fuel cells.

This could look like pairing the Fidelity MSCI Energy Index ETF (FENY) with the Fidelity Clean Energy ETF (FRNW). The blended strategy — an equal split between FENY and FRNW — may offer a unique way to play both sides of the energy transition.

The energy transition from traditional fossil fuel sources to renewable clean energy sources will rely heavily on existing infrastructure. Furthermore, traditional energy and infrastructure will continue to play a significant role in the energy transition in the coming decades. Therefore, investors can gain exposure to all facets of the transition by pairing FENY and FRNW.

Under the Hood of the 2 Energy ETFs

FENY is based on the MSCI USA IMI Energy Index, which represents the performance of the energy sector in the U.S. equity market. The fund has $1.5 billion in assets under management as of December 31.

FENY comprises 108 holdings. The top 10 names make up 63.2% of the fund by weight as of December 31. FENY’s top holdings as of December 31 include Exxon Mobil (XOM), Chevron Corp (CVX), ConocoPhillips (COP), EOG Resources (EOG), and Williams Companies (WMB).

FRNW is based on the Fidelity Clean Energy Index. The index is designed to reflect the performance of a global universe of companies across the market cap spectrum. Included companies distribute, produce, or provide technology or equipment to support the production of renewable energy.

FRNW has $24 million in assets under management as of December 31.

The fund holds 59 securities in total. The top 10 names comprise 33.8% of the fund by weight as of December 31. FRNW’s top holdings as of December 31 include GE Vernova (GEV), First Solar (FSLR), Vestas Wind Systems AS (VWS:DK), Enphase Energy (ENPH), and EDP SA (EDP:PT).

For more news, information, and strategy, visit the ETF Investing Channel.

Fidelity Investments® is an independent company unaffiliated with VettaFi LLC (“VettaFi”). These articles do not form any kind of legal partnership, agency affiliation, or similar relationship between VettaFi and Fidelity Investments, nor is such a relationship created or implied by the articles herein. VettaFi LLC is the author and owner of these articles.

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