It seems like a confusing conundrum, but it’s a rather simple question when you dissect it. You’re interested in investing in the oil & gas sector, but you’re unsure whether you want to buy shares in the big companies that produce these resources. Instead, you’re keen to know if there are alternative ways to get a slice of the sector’s pie.
So, can you invest in this industry and reap the benefits without directly buying stocks in energy companies? The short answer is…yes! It is definitely possible to profit from the energy market in multiple ways, and here are some interesting ideas how:
Invest in suppliers
Instead of buying stocks and shares in energy companies, you can invest in their suppliers. Energy companies will need businesses to supply them with things like gasket material, piping, and various other resources to conduct their mining. The suppliers will not be as big as the energy companies, so their shares should be more affordable. However, if the industry grows, so will the suppliers. Demand for their supplies will increase throughout the sector, making your shares become more valuable. At the same time, they won’t be negatively affected by any bad PR energy firms receive!
Start your own company
Another idea is to start your own oil & gas mining company. This way, you can physically acquire the energy resources yourself. Once you’ve got them, you can choose to hold onto them until the prices rise higher. Eventually, you sell them for a profit, making them a very smart investment. Obviously, this idea requires a lot of work and patience, but it’s not unlike starting a property development or investment company. The only difference is that you’re not buying property to sell; you’re mining gas and oil.
Invest in commodity-based oil ETFs
Exchange-traded funds (ETFs) will let you directly invest in a type of oil. You can select whatever type of oil you want, and you buy shares in it. This differs from investing in energy companies as you are literally buying the oil, so you don’t actually have shares in any companies. They operate on their own stock exchange and can be bought and sold as you like. Most people will suggest this option if you want short-term investments. It’s a good idea as you don’t have to worry about the state of a single company – which you would if you bought shares in an oil & gas giant. If a company goes through a rough patch, your shares will decrease in value. A lot of energy companies have been folding lately, but your commodity-based ETF won’t be as badly affected as you’ve invested in the resource itself.
You see, investing in this sector is more diverse than people think. The obvious idea is to buy shares in a company that mines for oil & gas. You definitely can do this, but it’s wise to open up to different ideas, diversifying your energy portfolio. There are plenty of options available, so consider one that makes the most sense to you.