Wednesday, January 14, 2015

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.

Coal burning power stations are used in many countries to generate electricity. Many appliances used in residential houses, in a myriad number of commercial related businesses and in industrial complexes will simply not function without electrical power. Electricity is critical to modern day infrastructure and to the proper functioning of everyday activities by all. Any serious disruption quickly leads to gridlock and chaos.

Fossil fuels such as crude oil are extracted from both the sea and on dry land. This critically important resource is used in many everyday products after being refined. Many people are simply not aware of many of the applications of refined crude and the uses made of its derivatives by industrial processes. Hair oils and car tires are typical examples of derivative products used by many people in society every single day.

The crude oil refinery process leads to the production of heating oil. This oil is used in burners in many of the older housing stock. Electricity and natural gas is utilized in burners used in the more recently built residential housing building structures. Prices for these various power sources are not uniform throughout the year.

The energy sector is one amongst many other sectors in financial markets. Investors can buy shares or exchange traded funds in all the sectors that make up modern economies. Some of the other sectors focus on retail, health care, technology, utilities and transportation. The diverse nature of financial markets gives investors more choices.

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 have become popular investment vehicles for retail and institutional investors alike. These exchange traded funds hold many company shares from the same disciplines. For example, if investors require exposure to the energy sector, dedicated exchange traded funds make it possible to invest in the whole sector instead of in just one stock. This is considered as sound risk mitigation strategies.

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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