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Ways to invest in oil
There are lots of options available. The most popular are trading oil as a commodity through the use of options and futures contracts, owning shares of oil-related stocks, or mutual funds that focus on the energy sector.
To learn more about oil-related investments, read on. The links below take you to individual pages which guide you through all the different approaches.
What is oil?
In the context of the energy sector, ‘oil’ refers to crude oil – a liquid fossil fuel that’s one of the world’s most sought after commodities. Although alternative energy sources have become increasingly popular, oil remains an essential part of economies all over the world.
If you’re just starting to learn about oil (and the energy sector), check out the commodities news and analysis that we publish right here on this site. That way you’ll get to better understand how oil and other commodities work, and identify investment opportunities.
How to invest in oil
We recommend getting to know all the options available so you can pick the investing method that works best for you. Here is a quick summary of the best ways to invest in oil using a variety of methods. To learn more, simply follow the links to our guides on each subject.
- Oil CFDs. You can buy and sell oil CFDs on many online brokers. CFDs (contracts for difference) allow you to make trades without owning the underlying asset. Instead of arranging to buy or sell actual oil, what you are doing is speculating on its price.
- Oil futures. An oil futures contract is an agreement to buy or sell oil at a preset price at a specific time in the future. Investing in oil futures can be a lucrative venture, but it can also be risky.
- Oil options. If you want to bet on the price of oil going up or down, you can buy an options contract. By holding that contract you gain the right, but not the obligation, to buy (this option is referred to as a “call”) or sell (called a “put”) oil.
- Oil stocks. There are many different stocks that let you tap into oil as an investment. You can get shares of companies that explore for oil, companies that refine oil, companies that sell refined oil-related products, and more. Oil stocks follow the same rules as other stocks: target oil stocks with the best possible earnings growth, and try to invest during bull markets rather than bear markets.
- Oil ETFs. There are now a number of ETFs (Exchange Traded Funds) which follow the price of oil. By investing in one of these ETFs, you can trade in relation to the value of oil without having to actually own barrels of the commodity.
- Oil mutual funds. A mutual fund consists of investors pooling money together to be invested by a fund manager, in a way that hopefully generates steady profits for all. Energy stocks, including oil-related stocks, are a core holding of many different types of mutual funds. Look for a mutual fund that charges relatively low management fees.