Popular Means of Energy Sector Investment

Investing in the energy sector can provide you with a great opportunity for the long term. There are many companies that are within the energy sector, and there are multiple ways to invest in them. Here are a few of the most popular means of investing in the energy sector.

Stocks

The most direct way to invest in an energy sector company is to purchase company stock. You can directly purchase the stock of any of the corporations that are doing business in the energy sector. In order to do this, you will need to open a brokerage account with a stockbroker. By purchasing stock, you are going to be dealing with a fairly volatile investment. When the company does well, your investment is going to go up substantially. When the company does not do very well, your investment could lose value. Stocks tend to be affected by many different things, such as news releases, investor sentiment and earnings reports from the company. If you invest in stock, it needs to be a long-term investment if you plan on making much of a return.

Mutual Funds

Another way that you can invest in the energy sector is through a mutual fund. There are several mutual funds that specialize in the energy sector. These mutual funds use the combined resources of the investors to purchase many shares of stocks. The fund manager is going to choose several different energy companies to invest in. Typically, a mutual fund will buy thousands of shares of stock. This provides you with a diversified portfolio. Instead of having your investment move up and down with the fortunes of a single company, you will be able to invest in the industry as a whole. This way, if a company goes under, it is not going to kill your investment. To purchase mutual funds, you will need to deal with a broker as well. You will place your order, and then it will be processed at the end of the trading day at the net asset value of the fund.

ETF

Another option that you have when it comes to investing in the energy sector is the ETF. The ETF also contains a large basket of investments such as stocks of different companies. You can choose an ETF that invests solely in the energy sector as well. One of the major differences between ETFs and mutual funds is in the way that they are traded. You can trade an ETF through the stock exchange just like a regular stock. Anytime that the stock exchange is open, you can buy or sell your shares of an ETF. By doing this, you will be able to know exactly what you will be paying per share. With mutual funds, you do not know what the price will be until your order is processed at the end of the day.

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