[Posted on December 26th, 2014 by Michael L. F. Slavin]
Little has changed over the years when it comes to the oil industry and the same risks that were involved way back at the beginning of the 20th century still face investors in this industry today. It continues to be a risky but rewarding industry. Investors continue to beat the odds and find new and lucrative companies to invest in. When considering oil investing there are a few ways to ensure the best possible investment.
It Takes Experience
Oil investing often requires a working knowledge of the industry and an experienced company to help you navigate the opportunities. Many find it beneficial to speak with a professional investor first. Since oil is a commodity, prices can vary quickly from day to day and an inexperienced trader can easily become overwhelmed with the idea of the risks involved.
On top of understanding the way that the oil industry works in general, it is also important for investors to understand the differences between the companies that are involved in the industry as well. However, there are many things in common about the great companies in the oil industry, and knowing what to look for can be a huge benefit when you are looking to add an oil company to your portfolio.
Which Companies Are Competitive?
Companies that have a legitimate competitive edge over their competition present a fantastic opportunity for investors. Some of the companies that perform the best are the ones that provide oil to an infrastructure that is critical.
How Are They Affected By The Market?
According to Money Morning, there are a variety of reasons that the stock prices continue to fall. However, there are still companies that are excellent to invest in when the stock prices are down. For example, if a company specializes in both oil production as well as the equipment necessary to obtain oil, they will be less affected when the price of a gallon of gas falls.
What Does Their Business Model Look Like?
Another important factor that must be considered when choosing an oil company to invest in is whether the company has the ability to sustain the level of revenue that they are presently involved with. This can easily be determined with a review of the company’s cash flow statement.
Joint Ventures Investing
When an investor selects a joint venture investing opportunity, they will be benefiting a direct line to the funds that are received from the production of the oil. One of the best things to consider with a joint venture opportunity is the fact that the production of oil in the US continues to rise from one year to the next, according to The Department of Energy.
Also, participating in a joint venture investment, an investor will have the added benefit of receiving additional income further down the road; even after the initial investment has already been returned.
Investing in oil can be a risky venture, but there are also a high potential to see significant gains as well. According to the IRS, there are also ways to save money when it comes to taxes as well. Making the decision to invest in the oil industry can be a huge decision and should be made with a great deal of information that has been gathered by the investor.