How to Invest in Oil in the Stock Market
- 1). Research carefully. It is very important to do all your homework before investing, especially in commodities like oil, which can be risky. Make sure you are investing for sound reasons.
- 2). Decide how much you want to invest. Determine how much of your investment portfolio you want in oil stocks. Putting all your eggs in one basket is a dangerous and ill-advised strategy, and investing in oil has distinctive risks.
- 3). Determine what your investment strategy will be in terms of how much you want to invest in oil stocks, what your exit strategy should be and at what point you will take gains or cut your losses. Without a complete strategy, your investment might amount to gambling. The price of oil is affected by factors that distinguish it from other investments. These factors include geopolitical events, natural disasters and the discoveries of new oil reserves.
- 4). Open a brokerage account if you haven't already. Simply go to one of the online brokerage accounts and fill out a few forms. Some popular online brokerage accounts are E*Trade and TD Ameritrade. Usually the minimum investment amount for opening an online brokerage account is fairly modest.
- 5). If you wish to invest in oil through the stock market, select and purchase an ETF in oil. One of the most direct ways of investing in oil is with the United States Oil Fund (USO) ETF, which tracks sweet crude oil in West Texas. USO owns crude oil futures, not stocks.
- 6). Investors might also consider buying stock in an oil company, such as Exxon Mobil (XOM). Or they might consider a more diversified energy ETF, such as Goldman Sachs Natural Resources iShares (IGE), which has holdings in both the energy and minerals sectors.
