3 Best Strategies for Energy Investments

Energy investments have become increasingly popular among investors in recent years, especially in cleaner and environmentally safer alternatives such as solar and wind power. Bloomberg recently reported clean energy investment worldwide had risen to a record $260 billion in 2011, thanks to a surge in solar power developments.

In addition to the surge in solar energy investments, wind power has also provided investors with a number of profitable opportunities. While clean energy represents the most recent energy investments, other sources of energy have provided investors with many opportunities for many years.

Oil and Gas Exploration

Buying and leasing land to drill for oil and natural gas makes up one of the oldest forms of energy investments.
While this investment strategy can be extremely capital intensive, with very few people able to afford the large initial investment, a number of companies specialize in this type of investment, pooling capital from a number of sources and offering shares through a prospectus to clients.

Another way to get involved in investing in oil and gas exploration is through common stocks of publicly traded oil and gas exploration companies. Many such companies can be found on United States stock exchanges, with a large number of them also trading on Canadian stock exchanges.

Trading in Oil, Natural Gas and Gasoline Futures

Another popular way to make energy investments is to trade futures contracts on energy products. Futures contracts trade on Light Sweet Crude Oil WTI (West Texas Intermediate), Heating Oil, Gasoline, Ethanol and Natural Gas (Henry Hub).

Futures contracts on energy products can be traded during regular business hours on a commodities exchange and during the after-hours through an electronic trading network. In addition, smaller investors can trade in mini contracts which are for smaller denominations of the energy product and trade for a lower amount of initial capital.

Trading in the futures market would require the investor to open a commodities trading account. Often these accounts allow the trader to leverage their money, with commodities, 20% of the price of the futures contract has been the norm with a certain amount required as maintenance margin if the position goes against the trader.

Buying Energy Stocks

Besides oil and gas exploration stocks, as mentioned above, United States and Canadian stock markets have a wide selection of companies involved in energy products. From oil and natural gas producers to oil refiners and solar power panel manufacturers, many companies are currently involved in energy.

Publicly traded companies producing products such as wind turbines and steam applications for clean energy, as well as producers of bio-fuels could make a profitable addition to an energy portfolio. Investors getting in on companies developing renewable energy sources which are doing the research and development to bring these technologies to the public may be taking advantage of a great investing opportunity.

World energy consumption has been increasing for years. Meeting the increasing world demand with cleaner and renewable energy sources represents a great opportunity for investors willing to do the research and invest in the right companies.
By Jay Hawk
Jay Hawk
Jay Hawk enjoyed a 12-year professional financial markets career incorporating extensive first hand futures and options experience obtained by trading in the stock, commodity and forex markets on U.S. exchanges. Since retiring as a full-time financial market professional, he has been actively trading stock, commodities, forex and options for his own account and managing funds for others, as well as writing financial market commentary and educational articles.

Copyrighted 2016. Content published with author's permission.

Posted in ...