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5 Ways to Invest in Oil Without Taking on Too Much Risk

5 Ways to Invest in Oil Without Taking on Too Much Risk
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By    |   Thursday, 16 November 2017 11:08 AM

Investing in oil can reap great financial rewards, but investors face plummeting oil prices at times in the volatile energy market. Oil still remains an attractive investment in the long term and investors could lose out when prices eventually rebound if they don’t invest.

There are safe ways to invest in oil at low risk. The commodity can rise and fall in price due to worldwide factors, but investors can hold onto their investments and profit in the long run with the help of certified financial planners.

Thorough research, tracking the performance of the price of oil, and taking note of how oil companies react during the ups and downs of the market help in choosing the right investments. You can find information on particular stocks by visiting the online investment sites of each one.

Here are five ways to invest in oil at low risk:

  • Exchange-traded funds (ETFs) include a variety of company stocks, futures, options, or derivative contracts, the Balance explains. The funds are easier and safer than investing in individual oil company stocks. The one price for a fund saves on commissions. Unlike other investments, capital gains taxes don’t incur until the investor sells the fund.
  • Oil stocks might be a good choice if you’ve done your homework and found cheap energy stocks that appear strong. You could buy one or two stocks and keep track. Oil stocks have the advantage of paying dividends, which can add up for long-term investors. Investors who discover they are getting substantial dividends over time can buy more shares of the stock to build up dividends, according to U.S. News.
  • Energy mutual funds take the complexity out of investing in oil for investors looking at low risk. It’s tough for the average investor to keep up with tracking or analyzing the highs and lows of the energy sector. Mutual funds have active managers who do that hard work. Mutual funds also offer diversity in a financial portfolio. A couple of stocks might drop in price during bad times while others maintain strength, so a fund with a mix of investments provides low risk.
  • Major companies offer safety and low risk. In the volatile oil market, the big guy will always come through when finding oil fields, building infrastructure in those fields, and continuing development. Such companies as ExxonMobil (XOM) benefit from production when oil prices are up and profit from refineries when prices drop.
  • Retirement savings accounts, such as IRAs or Roth IRAs, could include oil company stocks and ETFs for diversification. Although the oil market can be volatile, oil not only provides diversity, but it is also considered a hedge against inflation over time in the long-term investing of a retirement account, Investopedia points out.

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Investing in oil can reap great financial rewards, but investors face plummeting oil prices at times in the volatile energy market.
oil, risk, investing
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2017-08-16
Thursday, 16 November 2017 11:08 AM
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