Are you interested in investing in the petroleum market right now? If so, your timing is good because the world situation has sent oil prices on a roller coaster ride that will probably last for several months, at least. Volatility can be an investor’s friend in times like these, as long as they take time to research the market, learn about oil’s unique behavior, and begin slowly. There are dozens of ways to gain exposure to the exciting world of petrol-related products, but three standouts for newcomers. You’ve probably heard of one or two of them, but others are often unknown to beginners.
In addition to buying shares of oil producing corporations, many petroleum enthusiasts put their money into ETFs (exchange traded funds) or use CFDs (contracts for difference) to profit on up and down price movements in the global marketplace. Most newcomers are interested in either trading via apps like easyMarkets for the sake of convenience or using their desktop computers as a home base. Here are the pros and cons of each tactic.
Without question, the simplest way to take a position in the oil market is to purchase shares of corporate stocks. Be sure to choose the best-rated companies that are direct producers or refiners of petroleum and natural gas. The advantage of this strategy is that you can select any companies you want, pay little to no brokerage fees, and slowly build up a portfolio of blue chip or high-grade shares.
On the downside, shareholders are tied to the fate of the corporations they choose, which means that a company bankruptcy, legal trouble, or an off year can bring values down significantly. This can certainly lead to stress, which is one of the common habits that shorten lifespans so pay attention to the fact that there are pros and cons. For long-term, buy and hold investors, blue chip oil shares are an intelligent way to get started.
Exchange Traded Funds
ETFs and their cousins, mutual funds, are an excellent way to enter the petrol markets with less risk than buying individual shares of companies. There are several great growth ETFs and both these, and mutual funds offer investors the chance to take positions in baskets of corporate stocks, thus avoiding the dangers of individual share price fluctuations. You can use ETFs to buy groups of oil company stocks, gas producing corporate shares, or commodities. There are small fees involved with this kind of activity but many beginners like the idea of not having to choose one or two companies to add to their holdings. All the reputable brokers offer a wide selection of ETFs to choose from, which makes them an ideal way to get started as a petroleum investor.
Contracts for Difference
CFDs are not as well-known as other methods but often more understandable for newcomers. You don’t pay fees directly, but there are buy-sell spreads on every transaction. However, you can spend as little or as much as you like. Plus, you can buy CFDs on corporations, ETFs, commodities, or other petrol-related assets. The contracts are a way to guess price direction, so you need not own the underlying assets. When prices move in the direction you predicted, you earn a profit. When they move against you, you don’t. For beginning traders, CFDs are fast and easy and represent a simple approach to the complex global marketplace for oil.