Oil is a vital part of our economy, used in both production and transportation of everyday goods. Perhaps you’ve thought about capitalizing on this fact and adding oil to your portfolio but aren’t sure how or where to invest your money. Here is a quick primer on four types of crude oil investments that may suit your financial needs.
Stocks
Stocks are way to own equity in a company and share in its profits. For crude oil investments, look for stocks in companies specializing in exploration, refining and pipelines. They often belong to multinational corporations traded on major stock exchanges. Two advantages of owning stocks are dividends and liquidity.
Exchange-Traded Funds (ETFs)
An investment fund that is traded on a stock exchange is known as an exchange-traded fund, or ETF. An ETF can be made up of a variety of assets, such as stocks, futures or bonds. They are a good investment for the average investor as there is a larger exposure to the industry with less effort involved. A variety of ETFs can be found in all areas of crude oil production.
Futures
A futures contract gives an investor the right to buy a certain amount of product or asset at a fixed price; the delivery of the final product is a specific time in the future. Crude oil futures contracts can be complex and the market can be uncertain, making them more suitable for experienced investors. However, futures may be highly profitable for investors willing to take the risk and can provide a chance to participate in different ventures.
Crowdfunding
Crowdfunding is a new, perhaps unorthodox, way of investing in crude oil. Instead of buying equity into a company, investors directly fund an oil or gas project. The project only begins once it has been completely funded. Depending on the company, only accredited investors can participate in certain projects.
Always do research before investing to see what type of crude oil investments fit your price point and comfort level.
