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Investing In Oil Stocks

Posted On : Dec-04-2011 | seen (358) times | Article Word Count : 519 |

Many investors are on the lookout for profitable oil stocks to invest in. If you are wondering how to invest in oil, then stocks are your easiest choice.
Many investors are on the lookout for profitable oil stocks to invest in. If you are wondering how to invest in oil, then stocks are your easiest choice. Oil stocks are stocks in companies involved in trading in oil. You need to be very careful while choosing the company whose stocks you want to buy. Once you have chosen, it is rather easy to buy the stocks. They are traded in all the major stock exchanges. Otherwise, you can open your own brokerage account and start trading.

Choosing Oil Stocks to Invest in

You need to examine the different oil companies carefully before choosing which oil stocks to invest in. You should not be dazzled by great promises. It is best if you look for a reputable company which has a healthy cash flow. This ensures that they will be able to pay you steady dividends. Other points to keep in mind are the type of company, what products they trade in and their geopolitical situation. Taking into account all these factors, you will have to choose the most suitable oil stocks to invest in for you.

You should keep in mind that investing in oil promises great returns but they also carry the risk of great losses. For the ordinary investor, it is better not to put all your eggs in one basket and invest too heavily in oil stocks. It is true that demand for oil is increasing. These increases are becoming faster and faster as the developing countries gradually begin to use more oil for their own economic development. So the price of oil is not going to fall in recent days.

However, at the same time, oil being a fossil fuel, it is rapidly getting exhausted. Keeping all these factors in mind, it is advisable to diversify your holdings. Buy stocks in well-established healthy companies, but also invest in alternative energy.

Finally, improved drilling technologies and new discoveries of oil reserves have made oil investing highly attractive.

Types of Oil Stocks

While choosing oil stocks to invest in, you should keep the following categories in mind. Each has their own advantages and disadvantages.

You can buy stocks in large oil companies. They generally have well established cash flow and the investors receive moderate but steady returns. Their stocks are often under-priced. So, you can be sure of moderate to high returns on your investment. However, there is one problem with the large oil companies. In view of the rising prices, the government sometimes takes punitive actions against these companies which may affect the returns. However, any such effect will be limited in scope and not long lasting.

Small oil company stocks are another alternative and they are generally exempt from such punitive action by the government. They have yielded good returns in the past, but they do tend to be more volatile than large oil company stocks.

Finally, you may consider oil service companies like drilling and tanker companies and refineries when looking for oil stocks to invest in. But in depth research is recommended.

Article Source : http://www.articleseen.com/Article_Investing In Oil Stocks_113950.aspx

Author Resource :
How to invest is dedicated to teaching the beginner about all investment types. There is many ways to invest in oil, stocks is just one of them. If you would like to learn how to invest in oil then click the link to visit my website.

Keywords : oil stocks, investing, energy,

Category : Finance : Finance

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