How to invest in oil and earn stable income?

How to invest in oil and not regret it

Recently, geopolitical manipulations have led to the fact that the oil and petroleum product markets are beginning to lose institutional investors.

Hedge funds and large private players, at the slightest instability, prefer to withdraw capital into more independent assets, but traditional oil investment schemes still work.

The world’s largest investment fund, the sovereign pension fund of Norway, created on revenues from oil and gas production, announced its intention to exclude these raw materials from its package so as not to be dependent on too speculative fluctuations in hydrocarbon prices.

The stock market reacted with a drop in oil and gas stocks, and analysts see this as a signal that investments in oil and gas have become unprofitable and dangerous.But what should a small and medium investor who still relies on oil revenues do?

Differences between WTI, Brent Crude, and Dubai/Oman Crude Oils?

Proven oil investment strategies

Modern exchange technologies make it possible to invest in assets with oil participation with practically minimal capital.

Let us immediately recall reasonable money management and mandatory diversification: investments in raw materials should not exceed 10-25% in any investment portfolio. So, an ordinary investor has access to …

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Mutual funds or ETFs?

The simplest and least dangerous way to invest in oil is not critical for yourself.

You can buy shares of several funds or ETFs, get real access to the product, and at the same time not risk on the stock exchange and not depend on the prospects of any one company.

The investor will receive a percentage of the mutual fund’s profit proportional to the investment amount (share volume).

In principle, constant analysis from the investor is not required, but a general understanding of the market will be very useful.

The percentage of income is small but stable.

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Buying shares of industry leaders

On the stock exchange (with the help of a broker or on your own), you can purchase shares and derivatives of the largest public companies, such as British Petroleum, PetroChina, Chevron, ConocoPhilips, Marathon Oil, Royal Dutch Shell, Anadarko Petroleum Corporation or Gazprom, which guarantee stable dividends that everyone understands.

The more courageous may venture to invest in younger, emerging companies.

In any case, constant professional analysis is required, at least of the company’s reporting and the industry market as a whole.

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Investments in oil and petroleum products

Most of us cannot afford direct investments in organizing such a business.

Nevertheless, the average, but strategically-minded investor, who really trusts such commodities as oil and gas, can realize the investment as a purchase of a block of shares in an oil and gas company.

The stability of income directly depends on the dynamics of development and state regulation of the industry.

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Investing in Stocks

By executing transactions with exchange-traded assets (futures, stocks, CFDs, options), you can receive income from changes in prices for crude oil, gasoline, diesel fuel, and other petroleum products.

This is the most profitable scheme, but, regardless of the amount of investment, the price of oil (Brent, WTI, etc.) will be formed by the exchange and the risk of losses for a non-professional investor increases significantly.Even if you do not trade on your own, and your hired trader (or fund) manages the transactions, the investor needs confident skills in technical and fundamental analysis, not only of the global but also of the regional markets (for example, for the price of oil).

Start investing in Oils (Energies) on FXCM platforms

Portfolio investments with minimal risk

If you prefer a passive but stable income, then your option is portfolio investments with minimal risk.

Moreover, experienced investors who are ready to invest serious capital in oil and buy shares of oil-producing and oil refining companies, as a rule, independently select shares and periodically reform their investment portfolio.

Beginners can entrust this business to an experienced manager.

If you are a speculator at heart, expect quick profits from investments in oil and are ready to take risks, then your place is on the stock exchange.

We remind you: regardless of the preferences of any investors, the prices of oil, gas and refined products depend on the global situation in world markets, and the stability of trends in these assets is always deceptive.

The risks are very high.

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