Ask Matt: Am I overexposed to energy stocks?

Q: Am I overexposed to energy stocks?

A: It’s getting expensive to own energy stocks. But if you have a diversified portfolio, your exposure isn’t too much of a concern.

Energy stocks have turned radioactive on Wall Street. The Energy Select Sector SPDR exchange-traded fund, which owns a basket of large energy stocks, has lost a quarter of its value over the past 12 months. Meanwhile, profits in the energy sector continue to plunge along with the drop in the price of oil. Energy companies are expected to post 69% lower adjusted profit in the fourth quarter, says S&P Capital IQ. The price of oil has dropped to levels not seen since 2003. If you loaded up on shares of oil exploration stocks, then you’re hurting big time. Shares of Chesapeake Energy, for instance, are down 77% over the past year. But for most investors - who own the diversified Standard & Poor’s 500 index - the exposure to energy isn’t nearly as catastrophic. Energy stocks only account for 6.2% of the S&P 500, says Morningstar. Compare that weight with the 17.9%, 15% and 15%, weightings respectively of stocks in the technology, healthcare and financial services sectors. The energy crash hurts investors, but not as badly as you might think.

Paste BN markets reporter Matt Krantz answers a different reader question every weekday. To submit a question, e-mail Matt at mkrantz@usatoday.com or on Twitter @mattkrantz.