It's not a secret that the price of oil is highly volatile and comes with a lot of complex information for first time investors. Our purpose for this article is to shed some light on this topic and help you with making your first oil investment.
The importance of diversification
Diversification is very important when it comes to investing not only will it set you up for success but it's also going to act like a shield during economic crisis. A lot of oil stocks pays in dividends, which means that depending on the platform you are using, you might bet paid on a quarterly or yearly basis. Some of the risks that comes with investing in oil includes:
— Volatile markets
— High cost of entry
— Environmental impact
How to invest in oil
The introduction of online brokerage platforms has given a lot of people a chance towards financial freedom. It's important that you weigh your risks and the amount of money that you are comfortable in putting away before investing.
— Exchange traded-funds (ETF's): This is the simplest and cheapest way to integrate oil into your investments. Trading ETF's is quite similar to trading stocks (shares) and the tax implications are not that much.
— Crude oil futures: These can be purchased through a commodities exchange and must be sold before the contracts reaches it's expiration date.
— Mutual funds: In simple terms it refers to a pool of investments that are directed towards securing financial assets such as bonds, stocks etc. Although they aren't specific funds to that are designed to invest in oil, there's a handful of them that are keen of beating the market.
Finding a broker
As aforementioned, to facilitate the process of buying and selling your oil investments you need a broker. Which is someone that acts as a middle man and provides a platform for you to do just that. In South Africa the most popular one is Easy Equities. But that doesn't mean you should settle for it. Do you own research and find out which ones offers low brokerage fees and a simpler platform to invest.
To close things of, we strongly recommend that you do your own thorough research about the markets you are going to be participating in. We are just a click away to answering your questions, if you have any just jot them down on the comments section below. For more informative articles like this one, make sure you that you follow us and never miss out.
Content created and supplied by: ShakersAndMovers (via Opera News )