Author Topic: Time to invest in energy?  (Read 6566 times)

starguru

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Time to invest in energy?
« on: December 17, 2014, 08:03:20 AM »
With the recent drop, does it make sense to do a targeted strike and pick up some energy ETFs?  Bad idea?  Good idea?  If good which fund?

rmendpara

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Re: Time to invest in energy?
« Reply #1 on: December 17, 2014, 08:12:23 AM »
Unless you're an investor who enjoys taking higher risks for higher rewards (that may be the case), a great way is to simply start buying as the index hits bear territory and continue buying until you reach either a sizable position or the sector recovers.

There are some sector specific ETFs as well as broader ones covering multiple energy sectors (drillers, pipelines, refiners, etc). It doesn't take a genius to realize that energy is weaker than it has been in a long time, and chances are good that it will go higher rather than lower in the next few years. Of course, no one knows for sure, but that's around as certain as it gets with commodities.

Personally, I'm researching into the drilling companies as well as equipment/services, since they've been hit among the hardest. Additionally, the integrated majors have come down a bit, but much more slowly than other sectors. You don't have to always buy at the absolute bottom in order to enhance your returns in a reasonable manner.

starguru

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Re: Time to invest in energy?
« Reply #2 on: December 17, 2014, 08:23:02 AM »
Unless you're an investor who enjoys taking higher risks for higher rewards (that may be the case), a great way is to simply start buying as the index hits bear territory and continue buying until you reach either a sizable position or the sector recovers.

There are some sector specific ETFs as well as broader ones covering multiple energy sectors (drillers, pipelines, refiners, etc). It doesn't take a genius to realize that energy is weaker than it has been in a long time, and chances are good that it will go higher rather than lower in the next few years. Of course, no one knows for sure, but that's around as certain as it gets with commodities.

Personally, I'm researching into the drilling companies as well as equipment/services, since they've been hit among the hardest. Additionally, the integrated majors have come down a bit, but much more slowly than other sectors. You don't have to always buy at the absolute bottom in order to enhance your returns in a reasonable manner.

So I think you are saying not a terrible idea? 

Markets in general are down, perhaps better to just by my favorite market indexes according to my AA?

Thanx

ac

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Re: Time to invest in energy?
« Reply #3 on: December 17, 2014, 09:03:11 AM »
I've purchased about $6k in VDE (vanguard energy etf).  Maybe in a couple years I will feel like a genius.  Maybe I will kick myself.

I like the etf approach to spread out the risk.  I've lost 90% on a single stock pick and do not plan to revisit that feeling ever again. 

AgileTurtle

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Re: Time to invest in energy?
« Reply #4 on: December 17, 2014, 09:05:08 AM »
Oil EFT are as low as they ever been. If you were already planning on investing in them it may be a good time. Unless you believe in not catching a falling knife.

hodedofome

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Re: Time to invest in energy?
« Reply #5 on: December 17, 2014, 02:43:43 PM »
Oil EFT are as low as they ever been. If you were already planning on investing in them it may be a good time. Unless you believe in not catching a falling knife.

If you are referring to the ETF 'OIL' then yes, it's at all time lows. That's because it sucks and it's a horrible instrument. Buying and holding oil - directly - only works if you take physical delivery and store it somewhere.

If you want to invest in oil, pretty much the only way (that doesn't suck) is through energy companies/energy ETFs. Of course, it would be nice if we all knew that this was a temporary crash and recovery, and not a precursor to a sustained commodity downtrend like the '80s and '90s experienced. If that's the case, it could be a while before you see a decent payoff above and beyond the general market.

surfhb

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Re: Time to invest in energy?
« Reply #6 on: December 17, 2014, 06:22:42 PM »
Better have a sizable amount to invest.     IF you have gains, a good portion of that is going to be eaten up by higher gas prices   :)

bacchi

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Re: Time to invest in energy?
« Reply #7 on: December 17, 2014, 10:15:14 PM »
I plan to buy a long-term call option on oil soonish (when I get the chance to value it). It'll probably be around ~6k but it'll an insignificant part of my mostly VTI/VXUS portfolio.

bwall

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Re: Time to invest in energy?
« Reply #8 on: December 17, 2014, 11:36:40 PM »
With the recent drop, does it make sense to do a targeted strike and pick up some energy ETFs?  Bad idea?  Good idea?  If good which fund?

Don't try to catch a falling knife.

AgileTurtle

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Re: Time to invest in energy?
« Reply #9 on: December 18, 2014, 05:56:03 AM »
Oil EFT are as low as they ever been. If you were already planning on investing in them it may be a good time. Unless you believe in not catching a falling knife.

If you are referring to the ETF 'OIL' then yes, it's at all time lows. That's because it sucks and it's a horrible instrument. Buying and holding oil - directly - only works if you take physical delivery and store it somewhere.

If you want to invest in oil, pretty much the only way (that doesn't suck) is through energy companies/energy ETFs.

Could you elaborate?  I meant most Oil ETF, DBO, USO, OIL are at all time lows (quick search I could be wrong). I am genuinely curious why holding Oil ETFs would be any different than holding Gold ETF or general energy EFTs. 


jennifers

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Re: Time to invest in energy?
« Reply #10 on: December 18, 2014, 07:05:13 AM »
I bought 5000$ of VDE yesterday morning.  I'll probably sell it in January if it goes up significantly or hold it otherwise.

hodedofome

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Re: Time to invest in energy?
« Reply #11 on: December 18, 2014, 07:20:15 AM »
Oil EFT are as low as they ever been. If you were already planning on investing in them it may be a good time. Unless you believe in not catching a falling knife.

If you are referring to the ETF 'OIL' then yes, it's at all time lows. That's because it sucks and it's a horrible instrument. Buying and holding oil - directly - only works if you take physical delivery and store it somewhere.

If you want to invest in oil, pretty much the only way (that doesn't suck) is through energy companies/energy ETFs.

Could you elaborate?  I meant most Oil ETF, DBO, USO, OIL are at all time lows (quick search I could be wrong). I am genuinely curious why holding Oil ETFs would be any different than holding Gold ETF or general energy EFTs.
ETFs like USO or UNG don't physically hold oil, they buy futures contracts. Whenever there is contango in futures prices, the ETF is going to persistantly go down over the long term. Its a poorly structured instrument. It is not for investing unless you like losing money. It is only for short term trading.

The GLD ETF is not the same, it physically holds the gold so it doesn't suffer from contango.

Oil ETFs like XLE or OIH that hold oil company stocks are the only ones suitable for long term investing IMO.

You have to dig into the details of an ETF, they are not all the same and you are not always buying what you think you are. Oil prices are not as low as they were during the financial crisis, yet Oil ETFs are at all time lows. That should tell you all you need to know as to how crappy they are.

If you don't understand how an ETF works, then don't buy it!

starguru

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Re: Time to invest in energy?
« Reply #12 on: December 18, 2014, 07:40:59 AM »
Thank you for all the replies.  I think at this point Ill just pick a mid or small cap index.

AgileTurtle

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Re: Time to invest in energy?
« Reply #13 on: December 18, 2014, 08:01:30 AM »
Oil EFT are as low as they ever been. If you were already planning on investing in them it may be a good time. Unless you believe in not catching a falling knife.

If you are referring to the ETF 'OIL' then yes, it's at all time lows. That's because it sucks and it's a horrible instrument. Buying and holding oil - directly - only works if you take physical delivery and store it somewhere.

If you want to invest in oil, pretty much the only way (that doesn't suck) is through energy companies/energy ETFs.

Could you elaborate?  I meant most Oil ETF, DBO, USO, OIL are at all time lows (quick search I could be wrong). I am genuinely curious why holding Oil ETFs would be any different than holding Gold ETF or general energy EFTs.
ETFs like USO or UNG don't physically hold oil, they buy futures contracts. Whenever there is contango in futures prices, the ETF is going to persistantly go down over the long term. Its a poorly structured instrument. It is not for investing unless you like losing money. It is only for short term trading.

The GLD ETF is not the same, it physically holds the gold so it doesn't suffer from contango.

Oil ETFs like XLE or OIH that hold oil company stocks are the only ones suitable for long term investing IMO.

You have to dig into the details of an ETF, they are not all the same and you are not always buying what you think you are. Oil prices are not as low as they were during the financial crisis, yet Oil ETFs are at all time lows. That should tell you all you need to know as to how crappy they are.

If you don't understand how an ETF works, then don't buy it!

Interesting, thanks. I never really looked into commodity ETFs. I just assumed they all were futures and none held actually commodities. Nice to know.

trailrated

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Re: Time to invest in energy?
« Reply #14 on: December 22, 2014, 04:36:29 PM »
I would recommend Red Bull but they are still privately owned ;)

Mr.Chipper77

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Re: Time to invest in energy?
« Reply #15 on: December 23, 2014, 11:40:53 AM »
I have been nibbling on XLE . I like to be overweight slightly in energy...its not going anywhere. If it drops further nibble some more.