Welcome to professorsavings.com, we teach finance basics. Today we will teach you about 4 ways to invest in oil.
We hope these investment concepts will help you be a better investor.
Many people are looking for ways to invest in oil, a commodity used worldwide in several industries.
Investor Professor Savings decides to play the oil market to try and capitalize on a meteoric rise in oil prices. Luckily, he has many options to choose from.
Professor Savings may decide that the safest way to invest in the commodity is to buy an oil sector mutual fund.
This allows him to diversify his risk among several oil companies including refiners, producers and services so that his account’s value won’t be hurt by the poor performance of any single company.
Don’t put all your eggs in one basket.
Alternately, Professor Savings may prefer to buy an individual stock. He can buy shares of one of the major integrated blue chip oil companies that have dividend payouts due to their successful history.
While these oil company stocks don’t move exactly with the price of oil, they have the ability to make big profits when oil and gas prices are rising.
Professor Savings could also maximize his returns and risk by placing his money directly in oil by purchasing a future’s contact.
This contract is for the delivery of oil. Its value goes up with the price of oil and can be sold before the contract expires.
The fourth way Professor Savings can invest in oil is by buying an exchange traded fund.
His investment would be directly tied to the price movement of crude oil on a daily basis.
It rarely matches exactly over long periods of time but it is an easy way to invest in oil.
Professor Savings needs to be aware that investing directly in oil is risky business.
Professor Savings could make a nice profit if oil prices skyrocket or wind up in a poor house if oil prices suddenly plummet.