When a person begins investing, they will quickly discover there are a number of potentially lucrative markets to invest in. One of the most popular is the oil industry. However, without proper knowledge of what to expect and what to do, investing in oil can be quite risky. The good news is, details emerged about various options for getting involved with this industry. Each method found here comes with a certain level of risk and how much risk a person wants to take is completely up to them. Learn more about investing in the oil industry here.
Purchasing Oil Futures
A direct method that can be used to own oil to purchase oil futures or to buy oil futures options. The futures are considered to be an extremely volatile option and come with a higher level of risk than other investment options. Also, when a person invests in futures, it may require them to do quite a bit of homework and research and invest quite a bit of capital initially.
Exchange-Traded Funds – ETFs
For those who want a lower level of risk, ETFs are a smart option. This is a direct method of owning oil and is done by purchasing the ETFs. The ETFs are traded on the stock exchange and are able to be bought or sold in a manner that is similar to traditional stocks. An example of this would be if you purchased a single share of the United States Oil Fund, or USO, which would provide you with exposure to approximately one barrel of oil.
Indirect Oil Exposure
Investors are also able to achieve indirect exposure to oil by purchasing ETFs such as mutual funds in the energy-sector. These types of ETFs and the mutual funds only invest in the various stocks of oil services and oil companies and come with a lower level of risk.
Being informed and knowing the basics of oil investing can help ensure the best possible results are achieved. Without proper knowledge of this industry, it is impossible to know what level of risk is present. It may also be a good idea to work with an investment professional to ensure that the proper level of risks are taken.