Energy Stocks: Why They Deserve a Place in Your Portfolio

In this article, we’re going to walk through a sector that may seem boring and low-yield for many investors,
but one that is becoming increasingly important: energy.

Energy keeps the lights on in your house, powers the data centres that run AI, moves ships and planes, and
quietly sits behind almost every product you touch in a day. Whether you look at it from an economic, social,
or environmental angle, one thing is clear: if you’re investing for the long term, you cannot ignore energy stocks.

Powering the World Today

Before talking about energy stocks and energy ETFs, it helps to look at the global energy mix. Understanding this
mix is your first “lesson” in seeing where the risks and opportunities really are.

Roughly speaking, world energy production today still comes from:

• Oil – 30%
• Coal – 27%
• Natural gas – 23 to 24%
• Renewables (solar, wind, hydro, etc.) – roughly 10 to 15%
• Nuclear – about 5%

So while we talk a lot about green energy, the reality is that fossil fuels still dominate the global energy system.
And nuclear, despite all the debate around it, is still a tiny slice of the energy-mix pie.

From an investment perspective, that tells you two things immediately:

• The old world isn’t dead yet. Oil and gas is still a crucial part of the system, and won’t disappear overnight.
• The new world is coming fast. Renewables and nuclear are playing catch-up from a small base, and growth there can
  be very strong, but so can volatility.

This is why we see energy as its own asset class in a portfolio, rather than just a subsector of “utilities” or “materials”.
As you think through your own portfolio, treat energy as something you actively decide on, not just a passive by-product of a broad index.

Is Energy an Asset Class You Should Own?

The short answer is that, in our view, yes, it is. But the key teaching point here is: size it properly in your portfolio.

One practical way to think about it is to treat energy as a dedicated sleeve in your portfolio.

For example:
“5% of my portfolio should be in energy-related investments.”

That 5% (or whatever number you choose) could then be split between different segments, each playing a specific role.

Oil & Gas Producers

Such as Exxon Mobil Corp. (XOM:xnys), Shell PLC (SHEL:xlon), or TotalEnergies SE (TTE:xpar), give investors exposure to the workhorse energy base load.

Renewable Energy Companies

Such as NextEra Energy Inc. (NEE:xnys), Iberdrola (IBE:xmce), or GE Vernova LLC (GEV:xnys), or the up-and-coming player, First Solar (FSLR:xnas), give investors exposure to the renewable energy innovators that are growing their market share.

Nuclear Energy Producers

Such as Constellation Energy Corp. (CEG:xnas), Duke Energy Corp. (DUK:xnys), or the exciting new innovator, Nano Nuclear Energy (NNE:xnas), give investors exposure to new technologies such as modern and cleaner nuclear reactors
or even smaller modular reactors, garnering optimism from investors.

Energy-Related Services

Such as the companies that manufacture the equipment (turbines, solar panels, batteries, grids), for example Vestas Wind Systems A/S (VWS:xcse), the largest wind turbine producer globally, and Siemens Energy AG (ENR:xetr), a global energy infrastructure and equipment giant.

Material Suppliers

Such as uranium miners, for example Cameco Corp. (CCO:xtse), Paladin Energy Ltd (PDN:xasx), or Uranium Energy Corp. (UEC: xase).

If you are interested in future-looking technologies with huge growth opportunities for investors, we recommend you see our article on AI Robots: Why Elon Musk Believes This Will Be His Biggest Product Ever.

Investing in Oil & Gas With ETFs

You can invest in energy stocks via Exchange-Traded Funds (ETFs), available on Hugo’s trading platforms. The key idea to learn here is
that ETFs can be a simpler and cheaper way (instead of buying a portfolio of individual stocks) to instantly gain diversified exposure to sub-sectors of energy (nuclear, renewable, tertiary services, etc.), by buying the entire basket of stocks.

This diversification allows you to reduce the company-specific risk of picking individual stocks.

Most energy ETFs are still largely focused on the traditional space: oil & gas, exploration, and production.

Typical examples include:

• An ETF that focuses on oil & gas exploration and production companies, such as the
  iShares STOXX Europe 600 Oil & Gas UCITS ETF (EXH1: xetr).
• A broader “world energy” ETF where the main exposure is still to the oil and gas sector, but with more diversification,
  such as the iShares MSCI World Energy Sector UCITS ETF (WENS:xams).

With a broad ETF you may ask yourself: “What am I actually investing in?”

A global energy sector ETF often has a slightly wider mix of energy companies (often still dominated by oil & gas majors such as Shell, BP, Exxon Mobil), with different ongoing cost levels.

Here you’re basically investing in:

• Upstream producers (exploration and extraction).
• Integrated majors (from oil well to petrol station).
• Sometimes equipment and services companies tied to the oil & gas value chain.

With investing in oil and gas stocks there are pros and cons that investors must consider. Treat this like a checklist as you evaluate each product.

Pros:

• Cash-flow rich, especially when energy prices are high.
• Often decent dividends.
• Still deeply embedded in the global economy and supply chains.

Cons:

• Exposed to commodity price swings.
• Policy, ESG and regulatory pressure.
• Long-term structural headwinds as the world decarbonises.

Oil & gas is not “dead”, but it is a sector where you need to be honest: you are investing in a transitioning industry with long-term structural risks if companies fail to evolve.

If you are interested in investing in commodities that are critical in the energy transition and other key future technologies, we recommend you see our article on Silver To Skyrocket in 2025: Understanding How To Invest in Silver

Investing in Renewable Energies With ETFs

Now let’s talk about renewable energy ETFs, often seen as the “feel-good” side of energy investing, but one that comes with a tough reality that every investor should study carefully.

There are:

• Solar-only energy ETFs, such as the Invesco Solar Energy UCITS ETF (S0LR: xetr);
• Wind-only ETFs, such as the Invesco Wind Energy UCITS ETF (WDEY: xetr); and
• Broader “clean energy” ETFs, such as the iShares Global Clean Energy Transition UCITS ETF (INRG: xmil).

Broad renewables baskets include a mix of wind, solar, grid technology, and related equipment makers.

Here is the problem though, and this is a key teaching point:

A lot of investors who “wanted to help the planet” a decade ago and piled into solar ETFs have had a nasty surprise. Many have lost a lot of money, despite the fantastic long-term story.

Why did this happen?

• Intense price competition.
• Overcapacity in some parts of the market.
• Policy changes and subsidy risk.
• Very high expectations priced in during the “hype” phase.

So, if you believe in clean energy (and many of us do, long-term), we think it often makes more sense to look at broader renewable ETFs rather than highly concentrated solar-only or wind-only products.

Broader renewable energy ETFs spread risk across multiple technologies and regions, and often include a diverse set of companies
including those involved in grid infrastructure, inverters, and other essential hardware, whilst still giving you exposure to the energy transition theme, but with less company-specific or technology-specific risk.

Investing in Nuclear and Uranium With ETFs

Nuclear is the quiet 5% of global energy production today, but it is back in the conversation and is subject to substantial hype in recent years among investors due to:

• the higher demand for energy from data centres where AI models are trained;
• the advent and commercialisation of small modular nuclear reactors, making them more affordable;
• the recognition of nuclear as a renewable energy source by certain governments in Europe; and
• the greater acceptance of nuclear energy by governments that were previously skeptical or outright opposed due to safety,
  environmental, or moral concerns (e.g. Germany).

The advantages of nuclear over other renewables include:

• the stable baseload power without CO₂ emissions (as other renewables depend on the sun and wind);
• the energy needs of communications, data centres, AI, and electrification are exploding; and
• oil, gas, and coal are politically and environmentally more difficult.

There are specialised nuclear and uranium ETFs, for example:

• ETFs that focus on uranium miners and related companies, such as the Global X Uranium UCITS ETF (URNU:xetr).
• ETFs that combine nuclear utilities and uranium mining in one product, such as the VanEck Uranium and Nuclear
  Technologies UCITS ETF.

These can be interesting if you believe nuclear is going to play a bigger role in the long-term energy mix. But again, these ETFs are very niche, quite volatile, and often quite expensive in terms of ongoing costs. As a learner, you should
treat them as advanced tools, not beginner building blocks.

We talk a lot about AI and the need for huge data centres. But if you ask us, one of the more interesting new opportunities is the digital infrastructure defending these computers from attack. If you are interested in learning more, then we recommend you see our article on the Cybersecurity Crisis: How Can Investors Profit.

China: The Engine Room of the Energy Transition

Now we get to the part most investors in Europe and the US underestimate: China. We often talk about China as the “big bad polluter”, and to be fair, it is a huge source of CO₂ emissions, one of the biggest in the world. But we conveniently
forget that a big part of what they produce is for us Westerners. We consume the products and they carry the emissions on their books.

At the same time, China has quietly built a massive strategic advantage in the energy transition:

• Around 90%+ of global solar panel production is in China.
• Roughly 80+% of global wind turbine production is in China.
• 80–90% of the key rare earth elements needed for solar, batteries, and other green tech are controlled by Chinese companies
  or Chinese supply chains.

And it doesn’t stop there. China is producing the hardware for renewable energy (solar panels, turbines, batteries, etc.), and producing and consuming huge amounts of energy itself.

Meanwhile, in Europe we’re stuck in what you could call an energy trilemma:

• Do we build everything ourselves with local champions?
• Do we import technology from the US?
• Or do we keep buying critical components from China?

From an investment angle, completely ignoring China in clean energy, batteries, and rare earths is almost like trying to invest in semiconductors without looking at Taiwan. As a student of markets, this is a key analogy to remember.

China Risk

As you might expect, although there exist great opportunities in the Chinese energy sector, there are also enormous risks for Western investors, including:

• Currency risk.
• Higher volatility than your average European utility.
• Geopolitical risk and the threat of tariffs and trade wars.

For many investors, a compromise is to access this theme via global clean energy ETFs that naturally have a heavy weighting to Chinese producers, because that’s where most of the production actually is.

Building Your Own Mini Energy Stocks Portfolio

So how do you turn all of this information into something practical? One way to structure it is as follows. Think of this as a step-by-step exercise you can work through.

Decide Your Allocation

For example: “I want 5% of my portfolio in energy stocks.”

Choose Your Mix of Themes

For example: 2% in broad energy / oil & gas ETFs, 2% in clean energy / transition ETFs, and 1% in nuclear / uranium or a selection of individual energy-transition stocks.

Diversify Across Regions

Some global ETFs (which will naturally include a lot of US and Chinese names). Some European names if you want to avoid extra currency risk.

Know What You Own

Ask yourself clearly:

• Are you buying commodity price exposure?
• Are you buying equipment producers (turbines, solar, batteries)?
• Are you buying grid and energy infrastructure suppliers?

Accept the Volatility

Energy stocks, especially renewables and nuclear, are far from a smooth ride. Policy changes, subsidy regimes, interest rates, commodity prices, and geopolitical tensions all matter.

And, importantly, you don’t have to pick a “winner”. You can build a basket that spreads your risk across multiple technologies and geographies.

Final Thoughts: Energy Demand Isn’t Going Away

One last point that often gets overlooked. The energy demand from data centres and cloud computing alone is expected to grow from around 2% of global energy consumption to potentially 10–20% over the coming years. That’s just one segment.

Add in:

• Population growth in developing countries
• Electrification of transport
• Re-shoring of industry
• AI and automation

It is hard to build a long-term scenario where global energy demand doesn’t go up. That’s why we personally see energy as an asset class in its own right, and why it is crucial to include energy stocks in a forward-looking portfolio.