THE WORLDS BEST ENERGY INVESTMENTCONVENTIONAL ENERGY INVESTING GAME PLAN
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The worlds best energy investment is one that is secure, pays off big when energy prices are high, pays at least a modest return when energy prices are low, holds the hope of bringing energy prices down to a more sensible level, and works to assure energy supplies for generations to come. The best way to keep ahead of high energy prices is to own stock in companies that benefit from them. The best way to bring energy prices down, from an investment standpoint, is to invest in companies that are developing competitive energy supplies, or have a plan to greatly expand the ones we already have. Oddly enough, those qualities can often be found in the same company. While the news media often focus on negative facts about oil companies, they lose sight of the fact that big oil concerns like Royal Dutch Shell, British Petroleum, and others invest billions in oil exploration, and billions more in alternative energy development. And by happy coincidence, they are among the safest energy investments around. So, finding the world’s best energy investment can be as simple as investing in conventional oil and energy companies. Most of these firms are well aware of the fact that they aren’t in the oil, gas, or coal business so much as they are in the business of providing energy to an increasingly energy-hungry civilization. The safest way to invest in energy related companies is to invest in energy mutual funds. The seven-step process shown here will help you find and manage energy mutual funds that can put you on the receiving end of the energy cash flow. _________________________________________________________________ NOTE: Several of the steps below link to the free resources at www.wsj.com. But when you click this link for the free trial of The Wall Street Journal Online
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STEP 1- Understand the investing basics discussed on our Investing Basics page. _________________________________________________________________
STEP 2 - Understand both market risks and the level of risk you are willing to accept as you attempt to achieve your desired returns. The Investing Risks page offers a primer on risk assessment. _________________________________________________________________
STEP 3 – Find good energy mutual funds. There are over 16,000 mutual funds competing for your investment dollars. Only about a hundred of these funds are involved with energy investments. As shown below, the resources on the Find The Good Funds page make locating and analyzing energy mutual funds a snap. _________________________________________________________________
STEP 4 – Find profitable conventional energy mutual funds that fit your personal investment requirements. The world’s best energy investments will be found in great energy funds. You will often find energy mutual fund investments under the more general category of Natural Resources. The conventional energy sector is mainly composed of oil, gas, coal, and nuclear fuel in the form of uranium. As you search through energy related mutual funds you’ll see that the funds are diversified. They make a lot of oil company investments, but they also invest in gas, coal, and other operations. And they invest in supporting energy services like drilling companies, drilling rig manufacturers, and more. As you search energy mutual funds you will want to look at a number of aspects of each investment. Get the facts about oil companies, coal mining, gas drilling, and so on. In addition to the financial data, you may have personal or ethical concerns about where a fund is investing your money. A good fund locater makes finding energy mutual funds that meet your needs as simple as pointing and clicking your mouse. An excellent, easy to use, and free fund screener is available at The Wall Street Journal Online . If you want to give this screener a try just click the link and the front page of the WSJ will open. On the WSJ front page move your cursor to the ‘Markets Data & Tools’ tab in the upper right hand corner. Choose ‘Mutual Fund Screener’ from the drop down window.
Go to the ‘Asset Type’ box at the top of the page.
Be sure the ‘On/Off’ box is checked.
In the ‘Asset Type’ box, click the ‘Equity’ tab.
In the ‘Lipper Category’ window select ‘Natural Resources Funds’.
Be sure the other criteria ‘On/Off’ boxes on the left side of the screen are blank for now; you can fill those out in detail later.
Go to the bottom of the page and click ‘View Results’.
A ‘Results’ page will open that shows earnings and other data for over a hundred natural resources mutual funds. Many of these funds invest heavily in oil and gas production. Click each fund for details.
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Finding an energy related Exchange Traded Fund (ETF) is just as simple. Go to the Wall Street Journal Online and move your cursor to the ‘Markets Data & Tools’ tab in the upper right hand corner. Choose ‘ETF Screener’ from the drop down window. Scroll down to the ‘Fund Category’ section. In the ‘Fund Category’ section Check ‘Asset Class’ and select ‘Equity’ from the drop down menu. Also in the ‘Fund Category click ‘Additional Criteria’, then select ‘Sector’ from the drop down menu. After a brief pause, a ‘Sector’ drop down menu will appear next to the selection you just made. In the ‘Sector’ drop down menu select ‘Natural Resources’. Leave the other criteria on the page blank; you can fill those out in detail later. Go to the bottom of the page and click ‘Submit’ A ‘Results’ page will open. Click each ETF for fund details. _________________________________________________________________ _________________________________________________________________
In addition to the fund screeners the Wall Street Journal Online also has extensive mutual fund and ETF research sections. These research sections are found in the ‘Markets Data & Tools’ tab in the upper right hand corner of the front page of the WSJ. The fund screeners combined with the extensive research sections form powerful, easy to use energy fund research libraries. And, believe it or not, they really are free.
These and the other resources shown on our Find The Good Funds page are great tools you can use again and again in your search for energy fund investments. Some of the tools are free, others are part of a subscription service. You can explore all of them with the free trial offers to find the one, or ones, you like best. _________________________________________________________________
STEP 5 – Go to the mutual fund families you have selected and make your purchases. Don’t forget to limit your risk by limiting the amount you invest in any fund or sector (see Investing Risks ). _________________________________________________________________
STEP 6 – Monitor your investments and watch the market for the changes that will inevitably come. You may find yourself holding a fund for decades. You could also find that better performers come along regularly and you may be tempted to switch funds on a fairly regular basis. Use caution, follow conservative investment guidelines like those discussed on the Investing Basics links, and do good research before switching out of one fund and into another. If you are considering the use of a market timing plan with your investments be sure to check out the Free 30 Day Trial of MarketWatchs' Hulbert Interactive Newsletter
Hulbert reviews and rates over 180 financial newsletters with a computerized analysis system that determines the effectiveness, or lack of effectiveness, of the advice given in those newsletters. A few dollars invested here could save you thousands. _________________________________________________________________
STEP 7 – Keep learning. As with any type of investing, learning more about energy investing will help you make better and, hopefully, more profitable investment decisions. The sites listed below are great primers to help you get a greater depth and breadth of knowledge in the energy investment sector. The Investopedia Oil Industry Handbook explains a variety of facts about oil companies, including important energy investing guidelines. Of special interest to energy investors are the ‘Analyst Insight’ and ‘Porter’s 5 Forces Analysis’ sections. Rigzone.com is an online gateway into the oil industry. If you intend to make oil or gas industry investments, Rigzone is an excellent resource. Last but not least, our Energy Resources pages provide tons of vital data on both conventional and alternative energy resources. _________________________________________________________________ _________________________________________________________________
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