How to Profit From Higher Gas Prices

How to Profit From Higher Gas Prices

Knowledge is power, and can translate to profits as well. If you're tired of whining about prices at the gas pump, you should know that, yes, you can fight back. In fact, you can profit from rising gas and oil prices even if you are a small investor.

Oil and unleaded gas trade on commodities exchanges. That's how their price is ultimately determined. Trading futures contracts is not a game for the novice, but there are other ways to invest in oil and gas. It's so easy even a cave dweller can do it.

Here's how to invest and profit when oil and gas get pricey. Call this your basic investor guide to investing for self-defense. I'll give you 3 investment options. They get progressively simpler.

1. Buy stock in an oil company. Investing in stocks is real easy to do once you open an account with a discount broker. You can buy 10 shares or 10 thousand for a commission of $10.

This is the most difficult of your three basic investment options, because you must decide which stock(s) to buy.

2. Buy shares in an oil or oil & gas ETF (exchange traded fund). Just like above, you do this in your brokerage account. An ETF trades like any other stock. You can invest as little as a few hundred bucks if you like.

Investing in stocks with an ETF is an example of how to invest the easy way. The big advantage here is that you don't need to pick your own stocks. When you own an oil ETF, you are automatically invested in a fund that holds a list of the major oil stocks. Hence, you are instantly diversified in oil company stocks.

3. Buy a NATURAL RESOURCES FUND. Investing in oil or oil & gas can be so easy, you don't even need a brokerage account. These mutual funds specialize by holding stocks in the natural resources or energy sector. Some of them load up on oil stocks. When oil prices send the price of gas up, oil stocks go along for the ride.

By owning shares in the right natural resources fund you own a very small part of a large portfolio of oil stocks. Professional money managers select the stocks. You can invest a lump sum of money, and/or invest as little as $100 a month. If you're lucky, your 401k plan might have a natural resources fund as an investment option.

So, that's your basic investor guide to how to invest in oil & gas the easy way. Once you learn how to invest, you'd be surprised at the opportunity that's out there.

As a final note, investing is not rocket science. But then again, it's not so easy a cave man can do it either ... unless he wants to lose his shirt.

A retired financial planner, James Leitz has an MBA (finance) and 35 years of investing experience. For 20 years he advised individual investors, working directly with them helping them to reach their financial goals.

Jim is the author of a complete investor guide, Invest Informed, designed for average investors or would-be investors of all levels of financial background and experience. To learn more about investments and investing and his new financial guide go to http://www.investinformed.com

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