But it’s also a volatile sector that’s prone to cyclicality. How do you properly invest in these hot commodities without making yourself overly susceptible to ups and downs?

Vanguard Energy (VGENX) offers exposure to all the varied areas of energy production, from oil and natural gas to coal and beyond. All of these energy picks serve a common goal: to provide long-term appreciation.

The average market capitalization of its holdings clocks in at $35 billion, reflecting the portfolio’s mix of mid-cap and large-cap stocks. Such stocks dominate the energy industry, and this wide net allows the fund to court both stability and growth within the group.

The portfolio is based in large part on heavy-hitting oil and oil services companies such as ExxonMobile (NYSE: XOM), Chevron (NYSE: CVX) and Schlumberger (NYSE: SLB), major natural gas producers such as BG Group (OTC: BRGYY) and Gazprom, and jacks-of-all-trades such as BHP Billiton (NYSE: BHP). Management spreads out risk through exposure to smaller companies, such as exploration and production outfits, which currently make up more than 23 percent of the fund’s portfolio. It’s also bulked up its exposure to storage and transportation firms, which account for 1.3 percent of assets.

Management has nibbled on a few oil and gas equipment companies and service providers, firms that will benefit directly from increased production demand.

The fund boasts exposure to up-and-coming alternative energy firms as well, with an emphasis nuclear power. Although many still have a negative view of nuclear power because of accidents at Three Mile Island and Chernobyl, this blast from the past is one of the cleanest sources currently available–at least in terms of carbon dioxide emissions. And unlike biofuels and other marginal alternatives, nuclear has the capacity for large-scale application, making it an attractive long-term solution. If the Obama administration hopes to meet its lofty emission reduction targets, nuclear power will likely find a place in the nation’s energy policy.

A team of outside and in-house managers has run the fund since 2006, relying on a bottom-up approach that emphasizes fundamentals and value. The management team continues to monitor developments in the alternative energy space, a segment that should see growth in coming years.

Prospective investors might wince at the high initial investment and the cyclical nature of the fund’s holdings, but the opportunity for gains makes Vanguard Energy an attractive option for those willing and able to stomach the risk.

If you can’t swing the steep initial investment, Vanguard also offers a similar exchange-traded fund (ETF), Vanguard Energy ETF (NYSE: VDE). With an expense ratio of just 0.2 percent, slightly less expensive than its open-ended cousin, it’s one of the least expensive energy funds out there.

ETFs can trade at large premiums or discounts to net asset value (NAV), but Vanguard Energy is widely followed and tends to cleave closely to its NAV–the fund rarely moves more than 0.06 percent in one direction or the other.

The fund’s composition is another major plus. The bulk of the fund’s portfolio is made up of the major integrated oil and natural gas companies, such as Chevron and ExxonMobil, which also happen to be the fund’s top two holdings. It also offers exposure to coal through holdings such as Peabody Energy (NYSE: BTU) and service firms such as Schlumberger and Weatherford International (NYSE: WFT).

Although Vanguard Energy and Vanguard Energy ETF have slight variations in their portfolios and don’t move in lockstep, both are excellent ways to play the energy markets. And while watching the ups and downs of energy prices can be nerve-racking, they’re sure to return to their upward trend eventually; now is an excellent time to establish positions.