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Oil ETF Won't Break The Bank

Jul 3, 2008
Of all of the commodity ETFs (exchange traded funds) oil is probably the most exciting, as well as the most frustrating. Until very recently, the market price of oil ETFs has been steadily rising for quite some time. Is this a direct result of the increasing price of crude oil? In many ways it is. If you had invested in oil, in any capacity, a year or more ago, you are probably quite satisfied with your returns to date.

The oil market has actually been fairly level over the past couple of months, though the average consumer probably doesn't realize this. But, new investors are starting to get concerned about their oil investments. They are wondering if the analogy "what comes up, must come down" is going to be true for the oil ETF market.

Every day you read in the paper or see on the news the price of a barrel of crude oil, and these prices are anything but leveling off. So what does this mean to the investor? Oil exchange traded fund investors want to know what the prediction for the future prices of oil will be. But should they be concerned about reports on the world's oil supply? Yes, they should be concerned and watching closely. Commodity ETF trading is all about supply versus demand and futures.

Is the oil ETF investor making money when oil prices rise, or are only the oil companies profiting? To some degree all of the oil investors are making a profit. It seems that the price of all commodities go up with the price of oil, including oil ETFs. The reason for this is because the price of gasoline goes up with the price of a barrel of crude oil. When everybody is paying more at the pump, the people responsible for transporting all of our goods have to pay more to get it to the store, and so they have to charge more to the farmers or manufacturers. The manufacturers and farmers then have to raise their prices in order to compensate. So it might be a good idea not only to invest in oil exchange traded funds, but to mix them up with other commodity ETFs like agricultural.

The average investor is not likely going to be able to invest enough into the oil companies to make a good profit from them. Oil exchange traded funds, however, give this investor the opportunity to dabble in oil trading without breaking the bank. According to some analysts, there is plenty to be made in oil ETFs. All you need to do is watch the predictions for the future price of gasoline, which is talked about quite a lot in the news. However, other analysts warn that oil exchange traded funds are ready to come down and that now is not a good time to invest.

Oil ETFs may or may not be a good investment for you, only you can make that choice. Do your research and keep up with the trends and make an informed choice about whether to invest in this commodity ETF.
About the Author
Ryan helps you understand oil ETFs and shows you how to profit from an oil ETF.
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