Best Natural Gas ETFs Right Now

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Contributor, Benzinga
Updated: April 8, 2020

Want to jump straight to the best ETF broker? Check out Interactive Brokers.

The past few years haven’t been good for the energy sector. Overproduction and competition from alternative energy have depressed gas and oil prices. However, these conditions make natural gas ripe for speculation. The American energy companies have managed to earn a profit by producing natural gas more cheaply.  Plus, the energy sector is starting to see some slight upward movement. 

You could possibly benefit from a recovery in this sector by investing in natural gas exchange-traded funds (ETFs). These securities give you broad exposure to major natural gas-related companies without a large capital commitment. 

Natural Gas ETF Biggest Gainers and Losers

Natural gas ETFs exist in the volatile energy sector. Benzinga Pro and other financial news services publish the biggest gainers and losers lists for each market sector. You can use these lists to find a promising natural gas ETF or track its daily performance.

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Premarket Natural Gas ETFs

Premarket trading allows you to react to new information about your ETF before regular trading starts. Be aware that the low volume creates volatility. Also, some ETF investors only observe premarket trading to determine the direction and intensity of the market before the regular session.

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Aftermarket Natural Gas ETFs

If you change your mind about a trade, aftermarket trading gives you an opportunity to make a correction or act on late-breaking market news. But the aftermarket generally has lower trade volume than the premarket — making it as risky as penny stocks

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Why Invest in Natural Gas ETFs?

Consider these reasons to consider natural gas ETFs:

Versatility: ETFs give you the benefits of mutual funds, but you trade them like stocks. Some funds offer options and allow short sales. 

Dividends: All ETFs give investors 100% of the dividends from stocks in funds’ portfolios. 

Convertibility: Natural gas ETFs aren’t exactly cash equivalents. However, you can easily sell these securities — under normal market conditions.

3 Natural Gas ETFs by AUM

Assets under management (AUM) is an accurate standard to compare ETFs. It indicates the total market value of assets under management by a person or a firm. The primary goal of most ETFs is to increase its AUM. It gives the fund more clout and it attracts new investors. Using this standard of measure, here are 3 of the best natural gas ETFs according to AUM.

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1. VelocityShares 3x Long Natural Gas ETF (UGAZ):

With an AUM of $456.6 million, UGAZ attracts a large pool of investors who align with this fund’s approach. It is a 3x leveraged exchange-traded note (ETN). It seeks to triplicate the performance of the S&P GSCI Natural Gas Excess Return Index. The major gains from this fund potentially come in the long term. 

Be aware that potential oversized gains from 3x leveraging come with significant tail risks. Tail risk describes when a portfolio’s assets make a significant shift away from the normal risk estimate. It can wreck a portfolio. Also, UGAZ has a steep expense ratio (ER) of 1.65%; he expense ratio reflects the cost of managing and maintaining the fund. 

Due to the recent free-fall drop in natural gas prices, many investors prefer to make money by shorting UGAZ — some investors hold UGAZ shares in anticipation of big returns from an energy sector recovery. 

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2. United States Natural Gas Fund: (NYSEArca.UNG):

UNG has an AUM of $428.9 million and an ER of 1.28%. It is a heavily traded fund that tracks front-month natural gas futures on the New York Mercantile Exchange (NYMEX). This makes it super sensitive to movements in natural gas prices. 

If you have a long investment strategy, it would be hard to justify adding UNG to your portfolio. The fund has a 5-year annualized return of -24.93%. But having exposure to the most prominent financial companies in the natural gas sector is hard to pass up. Many natural gas ETF investors take similar positions with UNG as they do with UGAZ. 

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3. VelocityShares 3x Inverse Natural Gas (DGAZ):

Investors who are looking for big short-term gains favor DGAZ. Unlike long leveraged funds like UGAS, DGAZ attempts to triplicate the S&P GSCI Natural Gas Index for a 1-day period. If you hold the note for more than 1 day, the results may vary drastically from the long-term 3x position. Nevertheless, inverse leveraging comes with the same tail risk as long leveraging. 

Some DGAZ investors develop a long-term strategy of shorting DGAS. In recent years, these investors have benefited from the steady decline in natural gas prices. This explains the DGAS AUM of $155 million.

Best Online Brokers for Natural Gas ETFs

The rapid shifts and volatile nature of natural gas ETFs require the platforms and tools available through online brokers. Individual and professional investors gain a competitive advantage from using the resources of these top 3 online brokers. 

Self Direct Investment by JP Morgan
Best For
  • Chase Customers
securely through Self Direct Investment by JP Morgan's website

1. You Invest by J.P. Morgan

If you’re already a customer with Chase Bank, Chase You Invest by J.P. Morgan is a no-brainer. You can easily research, trade and manage your investments from your mobile device. You Invest provides online tools to search for investments, track companies and rollover your assets.

Only U.S. clients are able to open a You Invest account but it takes, on average, just a day to open and you’re able to apply fully online. Equipped with portfolio reports and pie charts, the mobile app is simple and user-friendly. The app is available for both iOS and Android devices.

With Chase You Invest you’ll have access to roughly 5,000 stock exchanges. There are plenty of research and educational tools provided on the app. Overall, we recommend the Chase You Invest platform for stock trading because it’s easy to open and fund an account. It’s also reliable thanks to its strong parent company, J.P. Morgan. 

TradeStation – Online Broker – ONL-TRA-INVE-2737
Best For
  • Futures Trading
securely through TradeStation – Online Broker – ONL-TRA-INVE-2737's website

2. TradeStation

You can take advantage of TradeStation’s $0 ETF trades and extended-hour trading. TradeStation provides a great environment for you to stay on pace with your natural gas ETFs. Its platforms deliver fast, flexible and powerful support with real-time data, marketing scanning tools and customizable charts. 

With EasyLanguage, you can use algorithmic technology to develop your natural gas ETF automated trade strategy. TradeStation’s Strategy Builder allows you to construct and optimize your strategy without having programming knowledge. Plus, TradeStation has a vast online database with historical trading data. You can use it for backtesting and analysis. 

Firstrade
Best For
  • Mobile Investing
securely through Firstrade's website

3. Firstrade

Firstrade also provides $0 ETF trades. It has responsive and flexible platforms that help you stay current on market events and your investing activity. Extensive research and reports are available to you through Benzinga, Morningstar, Briefing.com and Zacks. 

If you are frequently on the go, Firstrade’s new mobile app provides watchlists, easy trades, one-click transactions, research tools and educational videos. Customizable charts with dynamic graphics make your mobile ETF trading more efficient. Plus, Firstrade gives you a wider trading window with extended-hours trading.

TD Ameritrade
Best For
  • Options Trading
securely through TD Ameritrade's website

4. TD Ameritrade

Most online broker reviewers rank TD Ameritrade as the number 1 online broker.  It can provide an optimal trading environment with $0 ETF trades and unparalleled technology. Investors of all levels can find the resources they need to build a productive trading system.

The main platform allows novices the ability to invest like pros. It provides graphic charts, ETF scanners, research reports, instruction video and courses where you can interact with live coaches. For advanced traders, TD Ameritrade provides thinkorswim. It features customizable workspace, scanners, profiles and trading simulations. Also, Thinkorswim features ThinkBack. Traders use this app to backtest their strategies by referencing historical ETF prices. 

Is Natural Gas in Your Investment Future?

Natural gas companies have taken a price beating in recent years. Still, signs of a recovery in this sector keep investors motivated to hold short and long positions in this sector. Investing in natural gas ETFs provides a safer way for you to share in their guarded optimism.