Oil Investment Options: Types and Tips

Many people ask: can you invest in oil? The simple answer yes. The real question, then, is: what’s the best way to do, it? Here are a few things you’ll want to know about common issues with many of the options available:

Oil futures

If you want the simplest and most straightforward way to invest is to buy oil futures. Short of actually shelling out money for barrels of oil, which isn’t really a convenient and wise option–for one, where will you keep it?–this is the best and most direct way to achieve those ends. You’ll need to hire a commodities broker. Buy a contract to by oil for a future date and price for a barrel.

Tip: With this investment, it’s important that you stay on top of the price movement as well as timing of that price movement, says Forbes.

Oil ETFs

An easier way to invest is to buy an ETF (exchange traded funds). That’s because you can use your broker or financial advisor to buy the contracts. It’s essentially the same with the first one, except you work within a shorter time frame.

Tip: ETFs are great if you want a quick trade in and out of the commodity, typically lasting for less than 30 days.

Oil company stocks

How can you invest in oil this way? Simply buy shares of oil companies or invest in one. Your broker can handle the details of the transaction for you. One of the best things about this option–over the first two ones–is that you can get stock that comes with a dividend.

Tip: You can wait a while for the stock to climb, but because oil has rebounded, you’re covered and will get end getting paid dividends from the company you own. Your stocks don’t always move in step with the price of oil, though, so keep that in mind.

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