XOP vs TAN: Will an Oil & Gas ETF Bring More Profits Than a Solar Fund in 2026?

The State Street SPDR S&P Oil & Gas Exploration & Production ETF (XOP +1.09%) offers lower-cost exposure to traditional energy, while the Invesco Solar ETF (TAN -2.06%) provides more volatile, high-conviction access to the renewable energy sector.

These two funds represent opposite ends of the energy spectrum. One tracks companies pulling oil and gas from the ground, while the other follows the manufacturing and deployment of solar power. Choosing between State Street SPDR S&P Oil & Gas Exploration & Production ETF and Invesco Solar ETF often depends on an investor’s view of energy transition timing and risk tolerance.

Snapshot (cost & size)

Beta measures price volatility relative to the S&P 500; beta is calculated from monthly returns over the available fund history (up to five years). The 1-yr return represents total return over the trailing 12 months. Dividend yield is the trailing-12-month distribution yield as of the close of trading on Aug. 13.

The State Street fund is notably more affordable, with an expense ratio half the size of its solar-focused counterpart. This fee gap can significantly impact long-term returns for investors seeking energy industry exposure, as Invesco Solar ETF charges a much higher premium for its thematic focus.

Performance & risk comparison

What’s inside

The State Street SPDR S&P Oil & Gas Exploration & Production ETF focuses on traditional energy, with its portfolio leaning heavily into energy companies at 95% and basic materials at 4%, with less than 1% in technology (percentages are rounded). It contains 51 holdings and follows a modified equal-weighted index, which prevents any single company from dominating the fund. Its largest positions include PBF Energy Inc Class A (PBF +0.17%) at 4%, Par Pacific Holdings Inc (PARR -1.90%) at 3.5%, and Delek U.S.Holdings Inc (DK +1.50%) at 3.3%. The fund was launched in 2006.

The Invesco Solar ETF provides targeted access to the solar industry, with 61% of its assets in technology and 31% in utilities, with the balance in financial services and industrials. It is a more concentrated fund with 35 holdings that are adjusted quarterly to maintain alignment with the solar market. Its top holdings include First Solar Inc (FSLR +0.99%) at 10%, Nextpower Inc (NXT -8.01%) at 9.3%, and Enlight Renewable Energy Ltd at 7.6%. The fund was launched in 2008.

For more guidance on ETF investing, check out the full guide at this link.

Which looks like the better buy?

The Iran war and its effects on oil and gas prices globally have goosed the returns of XOP, as supply trouble has driven up the price of oil. (Natural gas, however, has stayed relatively low due to record U.S. production).

Solar energy stocks, meanwhile, have been in a slump in recent months due to fears of higher interest rates, which affects the cost of financing solar farms, making them more costly to build and extending out the date of breaking even on the investment.

The spike in oil prices is seen in XOP’s year-to-date gains of almost 42%, while TAN is up less than 1% on the year. Yet there is a good case the upside is already gone for XOP, given the market’s inability to push oil prices higher despite the continuing crisis in the Persian Gulf. Take away 2026, and XOP investors largely started 2025 where they started 2015, price-wise (dividends do mean shareholders benefited more). On the other hand, that also means XOP has been a steady fund, except for a crash during the pandemic period when demand plunged for fossil fuels.

Solar energy and TAN have been more volatile and tend to be more beholden to government policy. For instance, TAN rallied under the Biden administration and has slipped under the current one as policy has shifted to favor fossil fuels. Still, over the past 10 years, TAN has returned 9.6% annualized versus XOP’s 4.6%. Better long-term performance is a big plus.

There is also the macro environment to consider: Solar is the lowest cost way to produce electricity on a utility scale — it is far cheaper than natural gas, coal, nuclear, and certainly oil. Oil and gas, meanwhile, are seeing their long-term demand affected by most nations encouraging renewable energy to combat the climate crisis. Just one example: every million EVs put on the road reduces oil demand by about 25,000 barrels a day, a not insignificant figure.

If you’re a long-term investor, then you should invest in the sector that is seeing broad-based growth in demand, not the one that is seeing its demand base eroded. In this case, that means TAN is the ETF to buy for long-term profits.