Investing in the Transportation Sector

Investing in the transportation sector is a strategy that many people use to diversify their portfolios. Investing in transportation can provide you with a number of unique benefits. Here are the basics of investing in the transportation sector.

The Transportation Sector

This sector is made up of companies involved in the transportation of goods or individuals. In the transportation sector, you will find, for example, airlines and trucking and railroad companies. Many people choose to invest in this industry because it is a vital part of the success of our overall economy. There are a few different ways that you could potentially invest in the transportation sector. Here are a few of the investments that you can choose from.

Stocks

The most direct way to invest in the transportation sector is to purchase stocks of companies within the industry. For example, you could purchase stocks in a particular airline. This strategy will provide you with the greatest possible return on your investment. However, this is also the riskiest strategy that you could choose. When you invest in an individual company, you could end up choosing the wrong company--it could even go out of business. However, if this company does extremely well, you will be able to bring in a substantial return on your investment.

Mutual Fund

Another option to consider is investing in a transportation mutual fund. This is a mutual fund that collects capital from investors and uses that to purchase transportation stocks. This method is a little bit safer than investing directly into a transportation company. With this method, the mutual fund manager will select a diversified group of stocks. This means that, with the diversification of the investments, your overall risk is lowered. However, the potential returns of this type of investment are going to be smaller than investing directly into a transportation company.

ETF

Another option is to invest in a transportation ETF (exchange traded fund). A transportation ETF is very similar to a transportation mutual fund. One of the main differences between the two is in how they are bought and sold. With a mutual fund, you can purchase shares only at the end of the trading day. However, with an ETF, you will be able to buy and sell shares any time that the stock market is open. This means that if you hear important news regarding the transportation sector, you could quickly buy or sell the shares that you need.

Investment Considerations

When investing in the transportation sector, you should be aware that your investment will be closely correlated with the price of oil because oil is necessary to power the vehicles in this industry. When the price of oil is high, this cuts into the profit margins of the company. When this happens, your investments are going to suffer.

blog comments powered by Disqus
Scottrade