Putting your hard-earned money in a traditional savings account is not the only way for you to earn a little profit or interest. There are many other means of passive income that can even allow you to gain more, such as investing in commodities like oil and gas. Oil and gas are needed in all parts of the world, and it looks like there are no signs of this fact changing soon. When looking to invest in this industry, here’s how you can maximize investments in the oil and gas industry:
1. Invest in oil mutual funds
Investing in oil mutual funds is an excellent option, especially if you are a newbie in this industry. With mutual funds, your bank assists you with the whole process, as it is usually from the bank that you purchase these funds. They will explain to you the whole investment process, and how to study the rise and the fluctuations of the prices in this market. In doing this, you begin to have direct exposure to this market, at the same time learning as you go without having to take so much of a risk.
There is a lot to understand, analyze, and comprehend about oil and gas investing, so as a newbie, it is essential that you first start small with the basics.
2. Purchase oil stocks
One of the best ways for you to invest in the oil industry is also to buy stocks. To maximize your investment, you can be more aggressive by investing in multiple stocks in different oil companies. When you do this, you are putting yourself at an advantage, as you allow for more growth, because as an investor, it means that you are also increasing the demand for oil. Plus, it is like giving yourself security, such that if one oil company fails versus another, you will still have substantial earnings as you did not only limit all your money with just one company.
Investing in small, micro-stock companies or limited partnership companies that offer fossil fuel for oil, gas, and other resources is another excellent option for you, as it allows you to have a more hands-on experience and a more direct equity position. What this means is that unlike investing in bigger companies where you merely have no say in the corporation, and you only receive your interest or growth, in a limited partnership company, you will have a more direct position. Hence, you can maximize more the growth of your shares, as well as that of your chosen micro-stock company.
4. Buy oil commodity futures
Oil commodity futures refer to the agreements or contracts to buy oil at a specific price on a particular time in the future. By its nature, oil commodity futures are inherently riskier, because you do not know what will happen to the oil industry in that particular date you have agreed upon to put your investment in full force. However, if you are one of those who are lucky enough that the price of oil shoots up before the end of your contract, this commodity future is a very lucrative and profitable trade.
5. Master the different kinds of oil industries
With knowledge comes so much power in your hands to decipher which among the oil industries can suit you best. You can match these industries with any background knowledge that you may have, or with a field that you feel the most comfortable in learning about. It can help increase your earnings more if you know how to play with different types of industries, working through the ins and outs and the strengths and weaknesses of these industries. For example:
- Exploration companies refer to the oil and companies that do the drilling of oil. Oil exploration companies are beneficial for those of you who can afford it, and who are willing to take significant risks. If oil is found after drilling, your investment can pay off to up to ten times more than your initial amount. If oil isn’t found, however, you will lose this all.
- Services and support companies refer to the industries that directly support the exploration of oil. For example, the shipping and transportation industries, or processing companies. This option is a less risky one, being that the growth is steady, provided that demand for transportation still exists.
- Developing companies are companies that try to drill near previously proven oil sights. Investing in this type of companies are also less risky; however, the returns are also lesser compared to that of exploration companies.
- Income companies are those that make an income through the acquisition of land for oil drilling and processing purposes. Investing in this industry will be similar to investing in other stocks and funds.
As oil and gas are extremely important in the global economy, investing in this trade will be a good idea for you. It is one that is highly in demand, since it is needed in most industries. Hence, it is vital that you know the basics of how you can make the most out of this type of investment. The bottom-line of this all is that you obviously wouldn’t want your hard-earned money to go to waste.