Your Questions About How To Invest In Oil

Mark asks…

How to invest money, how to double it, and explain stocks?

I am wanting to invest my money, I want to know how stocks and bonds work, I am not very good with this kind of stuff, like when stock is down or up how does that affect you? I want to know how the Rockefeller’s became so rich in investing in oil. Please someone take the time to explain all I need to know about it.
Also, what would be the best stock and or bond to invest to, and if stock goes up how much will you get, how much would one cost like lets say Apple for instance, how much is that stock and if it goes up how much would I get. I have no idea about these things. Please someone give me great advice about it.
Marshall, if I give 25 dollars for 100 shares (2500) then does that mean if I sell that stock will I get $2,500.00? When can I sell that stock? If the stock makes $5.00 and now it it 30 dollars does that mean I for $3,000.00? When would I be able to get that money? One year, or whenever?

John answers:

People buy stocks in the hope to make money. A person buys shares of stock, and the company uses initial shareholder money to buy equipment and grow earnings. The growth is then translated into higher stock prices (hopefully) some day in the future because more people want to want to own shares, usually a year or two is a good time frame. Bond’s are debt instruments, which means you are giving a company or government money, and they should pay you back plus interest on a specified date, but the company or government can go defunct and you can lose all the money you invested. Stocks however are equity instruments, so you own part of a company. Companies don’t always grow earnings and that’s why some investments go down among other reasons.

The Rockefeller’s became so wealthy because he had a monopoly on the oil industry, and everyone had to come to him for oil, so he could charge very high prices. This is no longer a legal business model in the United States (exept in certain cases for utility companies, but profits are regulated)

Stocks move up an down in value based on market psychology, but over the long term- high quality stocks will appreciate more in value, because they are growing earnings faster or have a compete advantage. Bond yields(the interest you get paid) fluctuate too, but once you buy a bond, you are stuck with that interest rate. Bond yields are so low right now, it honestly does not make sense to buy them at all. When you buy a stock at 25 you might buy 100 shares(2500), and one year later it is at 30, you can sell it for 3000 dollars. You have not made any money until you sell it on the market at some later date. If the next day it drops back to 25 dollars and you havent sold the shares, you have made no profit and your shares are worth $2500.

The route I suggest instead is you should invest in stocks with good growth trading at cheap prices. Look for stocks that consistently beat earnings, have low price to book valuations(less than 3.5), high return on equity, and low long term debt. Some ideas for you to start with are Foot Locker, EMC, GNC, Macy’s, CBS, National Oilwell Varco, and Target (Don’t blindly take my stock picks though, do homework on them) Stick with this method and you will be a very wealthy man someday in the future.

Never buy just one stock, you need to buy stocks from different sectors of the economy, and rebalance your portfolio every so often. Invest for the long term and carefully research stocks and you will do well. Slow and steady ALWAYS wins the race, look at Warren Buffet and Peter Lynch for inspiration and go for it.

As a response to the last part of your question, there is no way to know how long your investment will take to make money. Once you sell your shares you will have the money back in you brokerage account within 1-2 days, from there you could tranfer the money back to your bank account, and spend it or do whatever. The more share you buy the higher your risk or reward is. Stocks don’t move up or down in one direction, so if it starts going down after you buy something, don’t chicken out unless something fundamentally has changed with the company. The value of shares will change everyday, tommorow they may be worth 24.75 ($2,475). If we knew for sure when to buy and sell it wouldn’t be called investing. What investors do is make educated guesses, by buying stong companies, and put faith in them that they will continue to do the same in the future.

Ken asks…

If the dollar collapses, will I still be able to sell my stocks and get my invested money?

If I invest in oil and foreign countries and then the dollar sees hyperinflation followed by a complete collapse, would I be able to sell my stocks even though I invested with the United States Dollar? Could I sell my stocks to another country and get my money, or sell it once the United States issues new currency?

John answers:

Well first are you holding stocks of companies that are traded on markets outside the US? Or are you investing in ETFs that hold foreign assets? Either way I believe that you are safe because by investing in foreign securities you are in a away betting that the US dollar will become weaker. If the US dollar experiences hyperinflation your investments should sky rocket. But i doubt the US, will experience hyperinflation(Even with Obama’s crazy budget). Our dollar may weaken against Asian currencies but China and Japan will not let our dollar get too weak. Simultaneously, our dollar will strengthen against European currencies. The Euro was over ratted and the pound is having problems cause the UK government recently failed to sell government bonds.

John asks…

The oil companies profits seem to do nothing but increase! Would this be a good time to buy their stock?

Should I invest in oil companies right now? They do nothing but make more money. And people are saying that gas could be $7.00 per Gallon within a year or two in the USA. That should equal more profits for oil companies.

Should I invest in them right now?

John answers:

What goes up…… Must come down… Besides… You come too late in the game……it will hit resistant level soon……

Charles asks…

Is it worth investing in an oil company like Exxon in the current market?

I was wondering if I have $10,000,000.00 and want to invest in an oil company like Exxon, what will the return be and will it be worth it?

Also, if it is not Exxon, will investing in other oil company be a consideration and what will the return be and will it be worth it?

John answers:

Wouldn’t we all like to know the answer to this question? If indeed you had $10 million, there are a lot less risky ways to make lots of money, because you have quoted such a large sum. This is the fantasy that most people get caught in. They pose a valid question on an invalid premise.

People with $10 million don’t need to make more than 3-5% a year to get rich. They already are. You, on the other hand, will never get anywhere at the current interest rate on a CD of 3%.Thus the question concerning stocks.

First, you would not put your entire investment into one basket. It was about this time seven years ago when I last owned Exxon stock. I’m a Petroleum Engineer, and know quite a bit about oil companies, and they had just discovered some big fields on the North Slope of Alaska. I woke up one morning, and found my IRA cut in half, when they spilled oil in the Port of Valdez.

Now, I trade Index Futures on the stock market for a living. In my opinion, the Top in the stock market is already in, and direction is now down for several months.

Some would tell you to diversify, but not by buying five different oil companies, you have to diversify across industries. But I would tell you that all ships rise and fall on the tide, unless you are an exceptional stock picker and fast enough to maneuver your boat to gain headway.

There are times when cash is King, and this is probably one of those times. If you’re in a mutual fund, switch to the money market fund or a CD or Treasury Bill; just park it for now. The name of the game is preservation of capital.

If you really do have $10 million, lets start our own mutual fund. Write me at dredude52@yahoo.com

Sharon asks…

ETFs or individual stocks in oil which one is more of a wealth builder in the long term?

I’m investing in Oil but haven’t decided if I want to do ETF oil sector or individual Oil company stock.

John answers:

Investing in an oil sector ETF can be a good way to make money, if you are able to watch what happens to the price of oil during the day, because most oil ETF’s while track the price of oil as it goes up and down. Oil has been very volatile lately, and some ETF’s can change by 3-6% per day.

You may be better investing in a solid oil company. I would recommend Exxon-Mobil (I own it), but stocks with more upside potential might by Chevron, Conoco-Phillips or BP (British Petroleum)

As I mentioned ETF’s can be very volatile. If you are new to investing, would go with one of these oil companies.

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