How to Venture into Oil Business Through Private Placement Investments
Nothing in this article is to be considered legal, tax or investment advice. Please consult with your attorney and tax professional.
Before you consider crude oil investing, it is important to note that there are many types of oil investments options to choose from, and so, you must understand how the industry works to make informed investment decisions. Unlike shares, crude oil is a physical commodity that must be handled and managed correctly. There are many complex procedures and logistics that most accredited investors might want to take on in their portfolios. For those unable to do so directly, there are other options to invest in oil; chief among them are oil ETFs.
Industry experts recommend ETFs for various reasons. To begin with, ETFs are useful when there is rebounding in the energy sector and you want to take advantage of the situation. Instead of purchasing many stocks, you can buy ETFs that trace stocks in that sector. Oil ETFs are gradually becoming the best investments for accredited investors after being pounded recently in the market correction. While oil is regaining its momentum, investing in oil ETFs is the most efficient option to play it.
Industry experts recommend ETFs for various reasons. To begin with, ETFs are useful when there is rebounding in the energy sector and you want to take advantage of the situation. Instead of purchasing many stocks, you can buy ETFs that trace stocks in that sector. Oil ETFs are gradually becoming the best investments for accredited investors after being pounded recently in the market correction. While oil is regaining its momentum, investing in oil ETFs is the most efficient option to play it.
Defining Oil ETFs
ETF stands for Exchange-Traded Fund. It is a type of equity instrument that specializes in natural gas, oil securities, and alternative oil investment companies. ETFs’ fundamental securities are comprised of energy equipment manufacturers, domestic energy producers, sector index, foreign oil and gas producers, as well as specific subsectors like coal and alternative energy.
Oil ETFs also represent different types of businesses, risk profiles, and regions. Because the energy industry is a crucial player in global economy, many investors with stable portfolios have considerable exposure to energy firms.
Oil ETFs also represent different types of businesses, risk profiles, and regions. Because the energy industry is a crucial player in global economy, many investors with stable portfolios have considerable exposure to energy firms.
Should You Invest in Oil ETFs or Private Placement Oil Deals
ETFs simplify oil investments. Normally, if an individual wants to invest in oil, they would have to buy individual oil stocks but first, determine the best company to invest in. Suppose you wanted to invest in oil index such OSX, you will be burdened by the long process of buying all the equities in the index basket to earmark a given price.
Furthermore, you would be less likely to achieve your crude oil investing goal because of complications and commissions involved during the transaction period. However, with oil ETFs such as the OIH, you will only be required to make a single purchase at a specific rate and save on commissions. Oil ETFs have naturally packaged ahead of time, with a single trade, you have access to oil prices from different securities. But what if you could skip the stock market and find a private placement oil deal in Oklahoma, Texas, or Nebraska? What if you could achieve better returns while still working with the big names in oil? We argue not only that it's possible but that we can help you do it. Call United Exploration today and talk to an investment specialist to get started.
Furthermore, you would be less likely to achieve your crude oil investing goal because of complications and commissions involved during the transaction period. However, with oil ETFs such as the OIH, you will only be required to make a single purchase at a specific rate and save on commissions. Oil ETFs have naturally packaged ahead of time, with a single trade, you have access to oil prices from different securities. But what if you could skip the stock market and find a private placement oil deal in Oklahoma, Texas, or Nebraska? What if you could achieve better returns while still working with the big names in oil? We argue not only that it's possible but that we can help you do it. Call United Exploration today and talk to an investment specialist to get started.
Which Oil ETFs Should You Invest in 2019?
For aggressive and passionate oil investors, here are the top oil ETFs to consider in 2019:
(XOP): SPDR S&P Oil & Gas Exploration & Production ETF
Exploration and production ETFs respond vigorously to the price action of oil. When prices of crude oil rally, oil ETFs escalate, and when oil sinks, ETFs such as XOP also drop. This was witnessed in October of 2018 as the ETF penetrated new markets by recording over 20 percent. As reported by The State Street SPDR, the main goal of XOP is to expose oil and gas exploration and production of Standard and Poor’s TMI, which is comprised of Oil and Gas Refining and Marketing, Oil and Gas Exploration and Production and Integrated Oil and Gas.
The relative strength index (RSI) of XOP usually signals an oversell of the XOP oil ETF. However, securities might remain oversold for some time. XOP oil ETF records approximately 12% - an amount that is less its 200-day moving aggregate. Therefore, if you are currently considering investing in XOP, it is advisable to hang back until positive signals mushroom.
(XLE): Energy Select Sector SPDR Fund
The XLE is the biggest energy sector fund with approximately $18 billion under its name. Some of the biggest players in the oil industry are members of the ETF. Examples include Service Giant Schlumberger, Chevron Corp. Exxon Mobile Corp, to mention but a few.
However, the ETF boasts of only 31 stocks, with the three holdings mentioned above boasts of almost half of the entire portfolio, primarily because of the market-cap weighting that favors larger stocks. As such, this makes XLE ideal for big energy stocks, with a low expense of $1.3 per 1000 investment or a ratio of 0.13 percent per annum. Either way, it is still a great way to play a rise in oil rates.
(VDE): Vanguard Energy ETF
The vanguard energy ETF is by far the lowest expense energy ETF. VDE is managed and operated by Vanguard Equity Investment Group. The ETF records an aggregate annual performance of 9%, which is more than Spliced US IMI Energy’s 8.87%, within the same period. The Vanguard Energy ETF’s expense ratio is 0.12 percent- this amount is meager.
Based on market capitalization, there are 150 energy stocks under this benchmark. In 2015 for example, the most significant holdings in this category were Chevron, Exxon Mobil, Occidental Petroleum Corp. Kinder Morgan, ConocoPhillips, and Schlumberger Limited.
(DBO): Invesco DB Oil Fund
The Invesco DB Oil Fund (DBO) records $78 per $10,000 investment or 0.78 percent per annum. Other oil ETFs to consider at this juncture are equity-based funds. DBO can be described as a futures-based strategy, making it ideal for investors who are looking for a convenient and economical method of investing in commodity futures.
According to Invesco, investors can directly invest in the index because the platform is a rules-based index comprising of future transactions on light sweet crude oil. Since DBO is a futures-based oil ETF, its price action is influenced mainly by supply and demand data. Recently, experienced traders have been leveraging bullish bets on oil as a result of the murky demand outlook. However, the future could look brighter if China and the United States resolve their trading contention, to create a conducive environment for exports to China.
(XOP): SPDR S&P Oil & Gas Exploration & Production ETF
Exploration and production ETFs respond vigorously to the price action of oil. When prices of crude oil rally, oil ETFs escalate, and when oil sinks, ETFs such as XOP also drop. This was witnessed in October of 2018 as the ETF penetrated new markets by recording over 20 percent. As reported by The State Street SPDR, the main goal of XOP is to expose oil and gas exploration and production of Standard and Poor’s TMI, which is comprised of Oil and Gas Refining and Marketing, Oil and Gas Exploration and Production and Integrated Oil and Gas.
The relative strength index (RSI) of XOP usually signals an oversell of the XOP oil ETF. However, securities might remain oversold for some time. XOP oil ETF records approximately 12% - an amount that is less its 200-day moving aggregate. Therefore, if you are currently considering investing in XOP, it is advisable to hang back until positive signals mushroom.
(XLE): Energy Select Sector SPDR Fund
The XLE is the biggest energy sector fund with approximately $18 billion under its name. Some of the biggest players in the oil industry are members of the ETF. Examples include Service Giant Schlumberger, Chevron Corp. Exxon Mobile Corp, to mention but a few.
However, the ETF boasts of only 31 stocks, with the three holdings mentioned above boasts of almost half of the entire portfolio, primarily because of the market-cap weighting that favors larger stocks. As such, this makes XLE ideal for big energy stocks, with a low expense of $1.3 per 1000 investment or a ratio of 0.13 percent per annum. Either way, it is still a great way to play a rise in oil rates.
(VDE): Vanguard Energy ETF
The vanguard energy ETF is by far the lowest expense energy ETF. VDE is managed and operated by Vanguard Equity Investment Group. The ETF records an aggregate annual performance of 9%, which is more than Spliced US IMI Energy’s 8.87%, within the same period. The Vanguard Energy ETF’s expense ratio is 0.12 percent- this amount is meager.
Based on market capitalization, there are 150 energy stocks under this benchmark. In 2015 for example, the most significant holdings in this category were Chevron, Exxon Mobil, Occidental Petroleum Corp. Kinder Morgan, ConocoPhillips, and Schlumberger Limited.
(DBO): Invesco DB Oil Fund
The Invesco DB Oil Fund (DBO) records $78 per $10,000 investment or 0.78 percent per annum. Other oil ETFs to consider at this juncture are equity-based funds. DBO can be described as a futures-based strategy, making it ideal for investors who are looking for a convenient and economical method of investing in commodity futures.
According to Invesco, investors can directly invest in the index because the platform is a rules-based index comprising of future transactions on light sweet crude oil. Since DBO is a futures-based oil ETF, its price action is influenced mainly by supply and demand data. Recently, experienced traders have been leveraging bullish bets on oil as a result of the murky demand outlook. However, the future could look brighter if China and the United States resolve their trading contention, to create a conducive environment for exports to China.
Conclusion
Yes, ETFs make Oil investments easier by allowing high net worth investors to put their money in specific areas. There are oil ETFs that provide exposure to the price of commodities. Nevertheless, it is crucial to know how much overhead you're paying by investing in an ETF. We argue in favor of private placement oil deals for high net worth individuals over the run of the mill ETF.
Whatever oil investment vehicles you select, we recommend you should consider all your options before blindly following the crowd into ETFs. Reach out to one of our private placement oil specialists and let us share the facts about our partnership opportunities.
Whatever oil investment vehicles you select, we recommend you should consider all your options before blindly following the crowd into ETFs. Reach out to one of our private placement oil specialists and let us share the facts about our partnership opportunities.
Note: nothing in this article is to be considered tax or investment advice. Please consult with your attorney and tax professional
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