Energy Investing For Retail And Institutional Investors

By Kristen Baird


Fuel sources are used to power the modern world. Sources of fuel include coal, natural gas, crude oil, sunlight and wind. Coal, crude oil and natural gas are the more traditional sources of fuel. Sunlight, wind and wave power sources, often referred to as renewable sources have been harnessed in more recent times. The sector makes up a vital portion of the activities within national economies. Energy investing takes account of the vital nature of this industry.

Power Stations often use coal as the primary source that eventually leads to the creation of electricity. Electricity is used to power many appliances in residential homes, in commerce related businesses and in industrial processing plants. Electricity is so vital to everyday use by people in their homes, commerce and industry that any disruption caused by man made or natural causes almost brings every activity to a halt.

Crude oil is extracted from under the ground. This extraction takes place on dry land and at sea. This vitally important commodity must be refined before the derivatives can be put to work in many everyday used products. Many people use these products without realizing that they are derivatives of fossil fuels. Examples of everyday used products from fossil fuel derivatives include oil for hair use and tires used in automobiles.

Heating oil is a derivative product of fossil fuels. It must be refined in order to heat, mostly homes built in earlier times. The more recently built housing stock are mostly heated by making use of electricity and natural gas in burners. Whether residential real estate buildings utilize heating oil, natural gas or electricity, fuel bills vary seasonally.

In addition to the energy sector, there are many other sectors that contribute to investment opportunities. These include shares or exchange traded funds based on companies in underlying sectors of transportation, health care, technology, the utilities industry and other disciplines. Diversity in investing improves risk management.

Institutional and individual investors managing money often target the vitally important and lucrative energy sector. Investing can be done in various ways. Some target investment funds that pool clients money and buy large chunks of physical assets in the sector. Others focus on financial markets and purchase shares in refiners, exploration companies, pipeline related business entities and tanker operators.

Exchange traded funds are often the investment vehicles of choice used to gain access to many companies within the various disciplines. These disciplines include the power sector. These exchange traded funds are believed to spread the risks of investing more evenly than buying shares in any one company. They have become increasingly popular. This is confirmed by the increasing amount of money flowing into these types of investment vehicles.

Many renewable and non renewable sources of fuels are used to generate power used for electricity generation. Renewable sources of power include wind, solar and ocean wave elements. Crude oil, natural gas and coal are the more traditional and non renewable fossil fuels used in power generation. Financial markets offer investors opportunities in all the segments that contribute to modern economies. Shares and exchange traded funds are popular investment vehicles.




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