Great risks and potential huge monetary gains. This can sum up in itself what oil investing is about. Not a market for the faint-hearted, oil investing today is a highly volatile sector where changes are the norm, and risk runs the gamut from quite low to extremely high.
Why Choose Oil Stocks
Still, why do so many choose to invest in this highly unpredictable market today? There is much that is said on the scarcity of oil, its dwindling volume, its absence of supply growth, as well as the tightening of supply by oil-producing countries. Balanced against the increasing demand for oil in a world which is driving towards consumerism, where oil needs are vital, it results in a situation where the price of oil is not likely to go down. In fact, it might just remain on the up, or constant at its relatively high price on the market.
This makes for a safe and relatively lucrative investment. However, oil investing should not be attempted as a hobby or in a happy-go-lucky way. Professional advice is best sought for this endeavor. Expert advice can be provided by portfolio managers, and investors can go one step further and learn about geographical characteristics of drill sites as well as seismic and structural features of oil industry sectors when considering potential investment. Here is more information on how to invest in oil.
Oil investing today also provides a rather large spectrum of risk potential, ranging from relatively low to highly explosive. The easiest and less risky investment is by buying stocks of well-known major or independent oil companies. More risk and higher returns can be found in smaller, aggressive companies and service companies which are expanding into new markets. Some of the riskiest but which may provide the highest return pertains to investing with independent operating companies on a direct participation investment, and also commodities futures trading.
Other methods of oil investing now include mutual funds which focus their portfolios on the energy industry, oil and gas companies traded on stock exchanges, independent oil and gas companies, drilling funds, royalty funds, lease acquisition funds, and combination funds.
Do Your Research
However, in all these cases, sound business acumen and diligence are advised. Investment acumen, investment objectives, and investment vehicles should all be determined prior to oil investing.
Investing in oil today wells can be very profitable. It can also be rather risky. With some education regarding how oil drilling works and about oil wells, the risks of investing in oil wells can be managed.
Ways to invest in oil now include commodity futures and options, buying a gas station, oil company stocks, oil ETF’s, and royalty funds. Within each category of investing there will be different options for investing. It takes time to research the options available for investing in oil, but it is worth it. Even with so-called “safe” investments, there’s always the risk of loss. Before getting started, be certain you can absorb some loss without it changing your lifestyle.