With oil selling at over $100 per barrel and drivers seeing higher prices every time they pull into the service station, many traders are looking to have exposure to the oil and gas sector.
For the regular individual, an oil and gas ETF (Exchange Traded Fund) will be the best investment vehicle to use to participate in this area. An oil and Camping gas stove fund will give broad diversification over the sector helping to smooth out some of the volatility that individual oil stocks often experience.
ETFs in this sector run the gamut from more conservative approaches such as XLE which includes the 44 energy-sector names that are found in the S&P 500, to more speculative funds such as BlackRock Funds Energy & Resources (SSGRX) that focuses on companies with a smaller market capitalization which brings more volatility and the chance for higher percentage returns.
There are also funds such as USO which are created to specifically comply with the moves in oil price. This type of fund is appropriate for traders who wish to speculate on short-term movements in price.
An oil and gas ETF such as USO will mimic the movements of the spot oil price by using a variety of derivatives such as futures and possibilities. While this feature makes USO and equivalent funds a simple way to speculate on short-term price movements, they are not thought of good long term holds due to the price slippage that happens with various expirations of derivative contracts and daily readjustments to maintain their relationship to the oil price.
There are also ETFs that are developed to correspond to the inverse of the oil price which effectively makes it possible for a buyer to take a short position on the price of oil without having to develop into involved with alternatives or futures investing. buying a short oriented ETF is as simple as shopping for a stock.
One large benefit that ETFs in general offer the investor is typically low costs. All funds of some type have some management fees associated with them. Typically exchange traded funds fall in the lower range as they are typically unmanaged.
As with all other areas of investing, a buyer must determine his or her risk tolerance and the proper allocation of funds to this specific sector. Once those factors are determined there will be no trouble in finding an oil and gas ETF that meets your targets.