Sink Or Swim Options Trading
Investing in Oil Stocks, Oil ETFs and Oil Mutual Funds by Investment Sage
“Formula for success: rise early, work hard, strike oil.” – J. Paul Getty
While the first two parts of this formula can be achieved by anyone with a dedicated work ethic, unless you are part of the Clampett family where a lucky shot finds a gushing well, the third part is where the challenge lies. J. Paul Getty obviously simplified his accomplishments with this statement but what can not be lost is the significance of Oil and its importance to any investor’s future success.
Growth in the demand for oil still threatens to outstrip growth in supply and there is money to be made. Investing in wells is not for everyone but investing in oil is. The Financial Markets provide investors a myriad of options to participate in this market including futures, stocks, oilfield services stocks to Oil ETFs and Oil Mutual Funds.
Large Oil Company Stocks
Large Oil Companies are amongst the largest companies in the world, with four (Exxon Mobil, PetroChina, Royal Dutch Shell and Chevron) ranking in the top ten according to the Finance Times Global 500. These companies have been producing profits in the tens of billions of dollars annual and have enormous petroleum reserves.
Small Oil Company Stocks
Small Oil Company stocks are usually more involved in exploration and production and whose market capitalization is between $250 million to $3 billion. These stocks usually sink or swim based on their exploration results which determines the amount of reserves they can bring to production. These stocks of these companies are more volatile and will react more to price fluctuations in the price per barrel. You should use due diligence before investing in some of the smaller oil companies paying special attention to the Management of the company to see if they have the necessary experience.
Oilfield Service Company Stocks
Oilfield Service Companies provide assistance to the Companies that conduct exploration and actually produce oil. They manufacture, repair and maintain equipment used in oil extraction and transport and assist the drilling companies in setting up wells but in general these companies do not produce oil or conduct exploration.
Oil ETFs and Oil Mutual Funds
Instead of buying individual stocks or futures, ETFs and Mutual Funds enable the average investor to participate in the price per barrel of oil like never before. You can purchase an ETF like USO (United States Oil Fund). It is widely traded and can be purchased through any brokerage account. Like a traditional stock its price fluctuates intra-day and can be purchased or sold at any time throughout the trading day. ETFs like USO can usually also be sold short to enable you to participate in any downward trend in prices or as a hedge to existing holdings. There are also numerous Inverse Oil ETFs which mimic a Short position to enable you to profit on a downward movement in Oil.
Much like ETFs, Mutual Funds like the ProFunds UltraSector Oil & Gas Investor (ENPIX) enable investors to participate in the price per barrel of oil without actually buying the commodity. Mutual Funds differ from ETFs in that they only price once a day after the close. Mutual Funds usually allow for systematic monthly investments for fixed dollar amounts so you can accumulate a position over time.
As a commodity, oils is part of the Energy Industry, one of the largest in the world. Every diversified portfolio should have some exposure to the Energy Industry and some to Oil specifically. The price per barrel affects every facet of our lives from the cost of groceries to the price of airline tickets. For the latest news on stocks, etfs and mutual funds in the Oil and Energy industries visit http://www.oilandenergy.net and http://www.investorpoint.com. Of course as with all investment decisions you should conduct thorough due dilligence prior to making any investment. It is important to note that the companies and securities mentioned here are solely for reference purposes only and do not constitute a recommendation to buy or sell.
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