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Investment in oil is beneficial if one is interested in buying an exchange targeted Fund (ETF). This kind of investment may vary as of companies (e.g. ETF securities and Lyxor). Traded just like shares, ETFs reflect the price of a specific asset or index. To reduce the effect due to "contango" that happens as a result of higher oil prices for future delivery as compared to current oil price, buyers should consult a stockbroker who can suggest when to invest in ETFs. The contango can influence funds relating to near-term futures contracts that depend on the oil price. Another option is that one can purchase shares in big companies such as Shell and BP. Buy shares of mid-sized businesses such as Cairn as well as oil "minnows" such as Tullow Oil.
* Shell: The Company pays reasonable dividend and its shares yield around 6pc. The payment is safe despite of fluctuation.
* BP: As if now shares of the company is traded at about 410p. However, the stockbroker has raised target price to 580p. In future, the shares will further rise.
* Cairn: Because of Vedanta deal, the shares of the Company drop about 9pc. However, Cairn has tried to keep its price to 446p despite of changing market scenario. In future, Vedanta deal will turn fruitful and the company will be able to achieve target price of 500p. At present, the best option seems that one can look forward to invest in funds. Since commodities and resources companies come at a third place of the FTSE Index therefore it is surprisingly difficult to avoid changing oil prices. As per studies, there are the two BlackRock Funds which have huge oil investments. They are the BlackRock Commodities Income investment trust and the BlackRock World Energy fund. Investec Global Energy is primarily related to companies that are into oil production, refinery and other services. The CF Junior Oils Trust is associated to companies which are into gas exploration and production. If one can take bigger risks then why not try spread betting. This type of investment option involves a low-cost method of gambling on commodities where one has higher chances of risk. With spread betting, one can bet on the future movement of oil price, but get ready to face higher risks because of uncertain oil market. Companies such as City Index or IG will allow spread betting. However, one should not indulge in spread betting without knowing implications. The author is an experienced journalist in oil related fields, who frequently writes articles related to oil prices & indexes and crude oil including tips on investment in oil. Please visit oil.com for more details.
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