How to Invest in Oil Companies
Even as politicians discuss alternative energy options, the reality remains that most people around the world will be dependent on petroleum to fuel their transportation needs. This scenario creates a long-term demand for oil that will make oil companies a profitable investment for many years to come. Investing in oil does not have to be a complicated process. Follow the instructions in this guide to learn what options are available and how to take advantage of them.
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Instructions
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Decide if you want to make an investment that is conservative or high risk. Investing conservatively in companies that purely sell oil and petroleum is the safest way to put your money in the oil industry, but may take more time to pay off. Investing in high-risk companies that are involved with exploration or dealing in unfriendly countries has the potential to generate enormous financial gains, but can also potentially lose your entire investment.
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Consider buying into the U.S. Oil Fund (USO) instead of investing in a specific company. USO is what is known as an Exchange Trade Fund. Rather than being a company, it is an asset that was created to track the market price of oil. Consumers can buy shares in the fund the same way they would company stocks. Simply buy shares at the market price of oil when the price is low then sell them (minus a small fee) when oil begins to trade at a higher price per barrel.
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Look up the ticker symbol for the oil companies that you are interested in. All companies that are publicly traded will be identified by a ticker symbol. For example, Exxon Mobil is identified as XOM, while Chevron is identified as CVX. Each company has a unique symbol. You can usually find these symbols by visiting the Investor Relations portion of the company website, or by typing the company name into a financial website, such as finance.yahoo.com.
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Research the historical performance of the company. Once you know the ticker symbol, you can look up the historical performance of the company. You can research the long-term and short-term trading prices of the stock to identify the highest and lowest selling price of the shares. This will help you identify the target price you wish to buy shares at, as well as to set a goal for the price you would like to sell shares at.
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Open an account at a website that allows you to buy and sell shares of stock. Scottrade, eTrade and TD Ameritrade are great options for this. You can also use the services of a professional broker, but it is faster and cheaper to do your own trades online, as long as you already know which oil company you want to invest in. Simply sign up for an account at one of these online trading sites and follow the instructions they provide for funding your account.
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Program your buy and sell orders. Program your buy orders for each ticker symbol/company you are interested in. Simply set the price you wish to buy at and the number of shares you would like to buy. The software will automatically execute the trade when your criteria have been met.
Setting sell orders works the same. Program in the price you would like to sell your shares at for each company, as well as the number of shares you are willing to sell at that price. The software will automatically sell the stock when your goal has been reached. At this point, you are automatically investing in oil companies even if you are not online to monitor the transactions.
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Tips & Warnings
Any investment carries a risk of loss. Be prepared to ride out swings that may put you at a short-term loss, and do not hesitate to cash in when you find yourself with an advantage.
Resources
- Photo Credit shehal, Flickr.com Creative Commons License
