While there are many ways to make money on the stock market, oil continues to be one of the most popular. The market is volatile and prone to fluctuations, but it’s still one of the most common investment methods. If someone is considering investing in oil, they can consider the reasons given here.
A balanced investment portfolio with a high degree of sector diversification is recommended, with at least 15% concentration in the energy sector. Holding investments from a variety of gas and oil companies can improve diversification and increase returns. An investor can choose a set of stocks or an ETF.
The United States represents five percent of the world’s population and uses one-quarter of its oil. By comparison, the combined populations of China and India make up one-third of the world’s population and they use 12% of its oil. As these countries’ economies grow, more oil will be used to power cars, planes, machinery and ships. When developing countries’ standards of living become equal to that of the US, it will put additional pressure on oil and gas supplies.
Stability in the Sector
It is important to note that Canada is home to the world’s second-largest oil reserves, and that they’re the top oil exporter to the US. Canada’s oil industry is here to stay. Therefore, it may be worthwhile for investors to work with Canadian oil companies when diversifying their portfolios.
International Market Exposure
Investing in the oil market gives a stockholder exposure to markets in other parts of the world. Many of the world’s developing countries are becoming dependent on crude oil as a cost-efficient energy source to fuel economic growth.
By investing in the gas and oil markets in America and Canada, buyers have fewer worries about political stability, unlike making investments in foreign dictatorships. While the investment may come at a higher cost, it can be offset by a diminished currency risk.
To make investments in gas and oil markets, it’s not necessary to convert US dollars into other countries’ currencies. Therefore, exchange-related losses are not a factor.