Your Questions About How To Invest In Oil

Ruth asks…

How do you invest in crude oil online?

I am a beginning trader with a TD Ameritrade account. I would like to know how to invest in crude oil. Is there an ETF or something out there?

Any info would really help. Thanks!

John answers:

Commodities. No ETF in the physical, but some ETFs like USO that try to do something similar. Unless you’re highly skilled and trained to do this, you should consider all money you invest as money you can be willing to lose.

Betty asks…

Is there a way to invest in small oil exploration companies?

Is there a way to invest in small exploration companies in the TX/ LA area? How much does it cost per day to drill for oil?

John answers:

There are small oil exploration companies that you can purchase stock in, relatively speaking.

Here are a couple to consider:

EPEX Market value 275 million. $16.36 a share
TGA Market value 277 million $4.74 a share

By the standards of oil exploration companies these two are very small. But both are profitable. I believe EPEX appears the better value.

Ken asks…

How does investing work… (oil companies)?

I would like to invest in oil companies are anything that will has a gib return.

How does investing work (the different types)?
What are the risk?
Any other details/websites

John answers:

Investing is mainly in equity or common stock, preferred shares, bonds, convertibles, mutual funds, ETF’s, commodities and options. The risk is that your investments can lose value especially during recessions or depressions and companies can go bankrupt. Good news is that good investments will go up especially for an oil company with proven or new oil reserves. If I were you I would invest in an Energy mutual fund or ETF since it will lower your risk than buying one company alone and will let a portfolio manager run the fund. If you wanted to buy a stock pick companies like Chevron or Shell that are leaders in the field. Good luck!

Nancy asks…

how to invest in oil in 2011?

since no real interest is being payed on savings accounts or cds, i assume it would be better to invest to see more profit

John answers:

XLE is the etf for energy/oil companies
It invests in companies such as exxon and chevrong, etc..
I like efts because you don’t get the ups and downs of individual stocks.
And they are almost free compared to mutual funds…

Sharon asks…

how to start buying oil stocks?

I would like to invest in oil but am really confused about the whole process. Do I buy the oil companies or oil? What are the differences in stocks and barrels. I looked up Exon and it was 69.00 but oil prices are 40.00 a barrel. Thank you for your help!

John answers:

When you invest in an oil company, you are investing in a company that makes its money selling oil. The share price of the company is only somewhat based on the price of a barrel of oil. The higher the price of a barrel of oil, the more money an oil company is likely to make and the more a person is willing to pay for a share of the stock. Now you actually can buy stock in an index fund with the ticker symbol OIL whose price is actually based on the price of West Texas Intermediate.

If you expect the price of oil to increase, it is many times a better idea to buy stock in an oil company than in OIL because of the leverage that the oil company offers you. In most cases the earnings of the oil companies increase more rapidly than the price of oil increases. However, that is not always the case because many times the oil companies increase their capital expenditures very rapidly as the price of oil increases.

If you do not know which oil company is the best, there are index funds that hold many oil company stocks. Among these are PXE–Powershares Dynamic Energy Exploration and Production Portfolio and VDE–Vanguard Energy ETF. There are quite a few others also.

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