Your Guide to Investing in Oil Companies

Your Guide to Investing in Oil Companies

As a stock market investor you need to have a closer look at all the sectors that are there and among them one of the major sectors is the oil sector. Again the oil sector in isolation is not a good sector but combined with the alternative energy sector this sector has a lot of potential.  

The oil companies are among the largest in terms of the market capitalization and in fact the top two are the blue chip companies. These companies also have the massive investment going on in the countries like Yemen, Syria and Russia where there is oil to be explored. The main challenge there is the country stability and the risk that it carries. These countries are not politically stable and the entire investment in that country can be a waste if the political scenario changes.  

The other major risk that these oil companies now face is the ire of the public because of the depleting oil resources. More and more governments are now increasing their subsidies to the solar energy companies and also to a lot of alternative energy companies. So if you are thinking of investing in such companies then make sure that you have a tab on the oil prices. You should shift your investments to the alternative energy stocks if in case the oil prices become too high and the consumption of the gas goes low.

The fact is that most of the oil companies benefit from the high oil prices as they have fixed cost of production and any upswing in oil prices benefits them. It is the pure retail companies that will pose a challenge and that can be easily overcome if you a diversified set of companies namely the natural gas companies, pure oil exploration companies, pure retail companies and the alternative energy stocks.  

Another way to invest in the energy companies is to invest in the companies that are there in the emerging economies like India and China. Both these countries have huge demand and that will mean that you will have the best of both worlds. In fact the initial public offering of the oil companies in these countries is a good way to gain entry into the market. You can also invest in the American Depository receipts of these companies. These ADR’s are listed in the New York Stock Exchange and you can easily buy them with your account that you have with the discount stock brokers.  

The author is a stock market investor who suggests that you invest in oil india ipo as a way for investing by stock market for beginners.

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