The oil industry is massive, volatile, but potentially very lucrative. Dubbed “black gold” since the very first oil wells, there’s a massive amount of money to be made in this niche, but only if you know how to go about it. If you’re ambitious enough to try to take a bite out of this market, then I salute you! Here are some of the different ways to invest in oil.

Invest Oil
Source: Wikimedia

First of all, stocks. This is perhaps the most obvious way to invest in oil. As I’m sure you know, fossil fuels are heavily dominated by a few big corporations. British Petroleum, Texaco, Royal Dutch Shell are just a few of the big names in the industry. Most of them have stocks which are ready to buy, albeit pretty pricey! While you can make masses of money investing in oil stocks, you should be aware that it’s still a commodity. Any commodity stock has the potential to be very volatile. If you’re going to buy stocks, make sure you spread them out over a few firms.

You may want to consider an exchange-traded fund, or exchange-traded commodity focussed on the oil industry. ETFs, if you weren’t already aware, move with the performance of a given index or market. If you invest in them, you can trade during the day just like a regular share. The main difference to consider is that they’re exempt from stamp duty charges. Obviously, this has led to a massive rise in popularity for ETFs. Some of the big providers include iShares and Lyxor. These offer ETFS crude oil, which tracks (you guessed it!) the going price of crude oil. If you wanted to invest in refined petroleum, red diesel or another fuel, you’d have to find the appropriate ETF. Within these though, you still have some options. Some ETFs are available in “short” or “leveraged” versions. The latter of the two tracks prices, except with a 2% leverage. When the price of oil is rising, it will beat it by 2%. When it falls, however, it will go 2% under.

Funds are another effective way to invest in oil. Most funds sold in the UK will have some kind of exposure to the oil industry. Commodities and resources companies now make up about a third of the FTSE index. When it comes to funds, oil and other commodities are pretty hard to avoid. If I opened any good investor’s portfolio, I’d be shocked if they didn’t have at least 5% invested in oil and stocks that are tied to the industry. If you really want to gamble, you may be interested in the Junior Oils Trust. This targets relatively small, but profitable oil firms, which the fund manager feels has the potential for a lot of growth. This might be in the form of a buy-out. More and more big oil firms are acquiring smaller ones to increase their reserves.

I hope this post has given you a helpful introduction to black gold. Do your research, pick a method, then go and make your fortune!

The post How Should I Invest In Oil? appeared first on Home Business Magazine.

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