In the past decade coal consumption has grown more rapidly than any other energy source. Looking at DOE growth in electricity you will see that the largest growth in power generation between 2009 and 2010 was from coal. Then there are the emerging markets, as average incomes rise in the emerging markets people migrate from the country to the city. When they do so they begin to use much more electricity than they did in the rural areas. One of the least expensive ways to generate extra electricity is by burning coal, this is true in emerging countries as well as the U.S. As a result, demand for coal is going to remain strong for the foreseeable future.

One way to invest in this trend is through the Market Vectors Coal ETF (KOL) which was the first (and at this time only) Coal focused ETF in existence. About 3/4 of the fund is made up of coal producers like ANR, CNX, BTU and ACI, the other 1/4 is industrial materials companies that are tied to the coal industry the largest position being Joy Global.


As you can see from the chart below, KOL is more volatile than the S&P 500 outperforming during the up cycles and under performing during the recession.

Performance of KOL Coal ETF Versus The S&P 500

KOL is a very active ETF trading several hundred thousand shares per day so it has plenty of liquidity for investing or trading. The net expense ratio is currently .59% which is about average for a commodity ETF of this nature.