We all know, especially the people of Alberta, that oil prices have hit record lows and are bound to go further down for the next few months at least. Many would have considered investing in oil stocks to reap higher returns at a later stage. That is not a bad idea at all and is definitely something investors should consider. BUT… here’s another question. What sector of oil and gas we should invest in. To me, we need to look at this from another angle and rephrase the question as, “What sector of Oil and Gas has been affected the most”.
We know services companies, such as drilling, have been affected the most. Now let’s relate this answer to our previous question i.e. what sector of oil and gas we should invest in?. Answer is Service companies.
Let’s talk about the reasoning of this answer:
Since service companies have been hit badly so the stock prices must be at the lowest, and we could wait few more months to get the best buying rates on stocks. Lower the cost higher the return, we all know that rule, don’t we!
Another logical reason is, whenever oil and gas industry is hit with low market cbd vape pen canada pricing, the first thing that stops is drilling. Vice versa i.e. As soon as Oil and Gas prices start to go up, first thing that starts is drilling again. So no matter how the market may respond to expected higher prices at a later date, drilling companies will start operating and will start making money, hence higher stock prices.
Since, I am myself a risk averse investor and like to play it safe, I’d recommend to save some money for the ‘bad times’ that may come because of the worsening market conditions of oil and gas, which ultimately affect every other industry, and then invest the rest on oil stocks or any other investments you may find interest in.
Further, when investing in stocks, we have to be very careful that we understand the risks involved and our tolerance ability of those risks. Commodity stocks have always been interesting in terms of the returns they can generate and Oil and Gas is no exception. It’s better to take the guidance of an investment advisor or a brokerage firm, of course some fees are involved there, to make the right decision about when and how much to invest.
Muhammad Khurram Shahzad is an ERP consultant in an MNC in Canada and an experienced investment advisor. He has been involved in many start up ventures and has created business plans for the start up companies. He writes on different investment and finance related topics in blogs, articles and other forums.