Buying Oil Investments – Chapter 7: Exchange Traded Funds

This is chapter number 7 out of 12. Read the rest:

Read Buying Oil Investments – Chapter 1: Introduction
Read Buying Oil Investments – Chapter 2: Getting started in oil investments
Read Buying Oil Investments – Chapter 3: Factors which affect the price of oil
Read Buying Oil Investments – Chapter 4: The determinants of Oil Prices
Read Buying Oil Investments – Chapter 5: Trading in Oil Futures: (The impetus of the market sentiment)
Read Buying Oil Investments – Chapter 6: Investment Options

Exchange Traded Funds (ETFs) are a class of investment vehicle which traded on the exchange much like the way stocks are traded. Through ETFs, investors can have a more direct exposure to oil prices. This is due to the fact that oil prices are not directly related to the stock market or the Forex market. Therefore, ETFs allow for better correlation to the oil prices than energy stocks themselves.  

Of late, ETFs are becoming more popular as they allow easier access to ownership of the energy sector commodities. For instance, an investor can purchase one share of U.S. Oil Fund ETF (USO) which gives him a market exposure equivalent to approximately one barrel of oil. Thus if the oil price were to rise by 10%, your ETFs investment ought to rise by 10% as well. With ETFs, you are able to own the oil with the incidental cost of storing the physical oil. You are only liable for a small management fee plus the brokerage fees associated with the sale and purchase of the ETFs. Some of the popular oil ETFs are as listed below:

• Goldman Sachs Crude Oil Total Return ETN (OIL)
• iShares Dow Jones US Oil & Gas Ex Index (IEO)
• iShares Dow Jones US Oil Equipment Index (IEZ)
• Oil Services HOLDRs (OIH)
• PowerShares DB Oil (DBO)
• PowerShares Dynamic Oil & Gas Services (PXJ)
• ProShares UltraShort Oil & Gas (DUG)
• SPDR S&P Oil & Gas Equipment & Services (XES)
• SPDR S&P Oil & Gas Exploration & Prod (XOP)
• United StatesOil (USO)

 

Read Buying Oil Investments – Chapter 8: The Risks Of Investing In The Oil & Gas Industry
Read Buying Oil Investments – Chapter 9: Advantages Of Investment In The Oil & Gas Industry
Read Buying Oil Investments – Chapter 10: Investments in Gold versus Oil
Read Buying Oil Investments – Chapter 11: Peak Oil
Read Buying Oil Investments – Chapter 12: Conclusion