How To Invest In Oil Stocks
Learninh how to invest in oil stocks will make sure that you will profit from the ever rising oil price. Oil is one of the most important natural resources to people, and we will use oil for a foreseeable future. However, the supply of oil has been steadily decline, for both natural and political reasons. As the supply dwindles and price rises, you can profit greatly from investing in oil stocks.
- Build your investment strategy. You need to make a strategy and stick with it. How aggressive are you willing to invest? If you are an aggressive player, then you can look into small oil exploration company’s stocks. If you want to play safe, then maybe you should look into ETFs, mutual funds, or large companies.
- Know the risks. Invest in oil can be very risky. Not only does the oil market fluctuate greatly, different oil stock also has different underlying risks. You need to be aware of all the risks before you put your money on the line.
- Do your research. There are many ways to invest in oil stocks. Oil stocks of a small exploration company are very volatile, because their chance of success is entirely depended on one or few factors, such as finding oil reserve. Oil stocks of a large company are much more stable, because they are well diversified in the oil sector.
- Buy oil stocks. Now that you have figured out your strategy and risk level, you can start buying oil stocks of various companies that fits your profile. You can research on those stocks by using tools that your broker provides, or respectable online investing communities, such as the Fools.
- Consider other alternatives. Oil ETF, such as United States Oil Fund (USO), is another great alternative. It trades much like a stock, but it is an investment fund that tracks the price of oil per barrel. Never restrict yourself into one or two methods when you are investing in oil.
Diversify your oil stocks may help you reduce the risks of your investment.
A great trader once said: “Buying stock is gambling.”
Commodity market like oil is extremely volatile so act with caution when investing.