Investing in energy fund It is difficult to believe that oil near $ 100 a barrel, but the U.S. consumes more than 1 billion (1,000,000,000) more liters of gasoline in 2007 than in 2006.
Like a certain president once said, we are addicted to energy. We keep thirst more, regardless of price. Ask yourself this: Are you plugging more things into the wall each year? This requires even more oil, natural gas or coal.
China, India and other new economies also consume more energy each year. Political instability in Nigeria, Iran and Venezuela could limit supply. And there is only so much oil (natural gas and coal) in the soil. I am not suggesting that we miss, but it becomes more costly to extract.
How can you relieve the pain every time you meet? Or better, how can you profit from high energy prices? By investing in energy companies. There are two ways to do so. You can buy a fund natural resources sector or you can buy a value fund that holds stocks of energy. The mutual fund industry is the play "pure".
It holds stocks of energy and, probably, stocks of minerals, iron ore and copper mining companies. The risk with a sector fund is that there are not many of them to choose and they are not diversified. Do not misunderstand. A sector fund is diversified in its field of intervention, ie, has a number of mining companies and energy, but that investors in funds only part of the economy is inherently more risky, then a fund Diversified mutual.
The other way to "play energy" through a large cap fund or a CAP mid value. These funds generally have exposure to energy. The disadvantage of this approach is that mutual funds investment have value only part of their assets invested in energy stocks.
With either fund a natural resource or a value fund (or fund, for that matter), do not just go by the name. different fund managers and different approach to their mandates. Drill down (no pun intended) and check the Fund's assets to see if they match your expectations.
You can do this by going to the Fund's website for a complete list of its assets. The lists of top rated resource and value funds can be found on websites such as Morningstar, Lipper, Value Line and MUTUALdecision.
Your broker, Schwab is a good example, may also have this information online. The largest fund families such as Fidelity, T. Rowe Price and Vanguard all have natural resources and funds and the value may have information on others, too.
investment approach that is right for you? It depends on how much risk you're willing to take and how your assets are invested in other (think of your whole portfolio diversification). With an investment of energy could ease the pain, the next time you meet.
Posted on January 18, 2010.
