Oil has slid down a slippery slope...Buy USO today!
Market Alert: 2009-01-27
Hi everyone,
I am short on time this morning but I wanted to announce that as of today's opening bell I have purchased my initial stake in USO, which is the United States Oil Fund (an ETF). This fund buys oil futures contracts on a rolling basis; they hold the near month contract until it is about to expire and then sell it to buy the following month's contract (or something very similar to that strategy, but read USO's prospectus to get the complete details). The point is that buy owning USO you have a stake in the oil futures market without having to manage the buying and selling of futures contracts yourself.
As with everything I recommend, I do not recommend putting too much of your money in USO because diversity is the best way to achieve a positive risk-adjusted return in the long run. But I do think that crude oil and the greater energy sector are starting to make a bottom now. In my opinion energy is one of the key sectors that I expect to outperform the market in the next 2-10 years.
Bottom line...buy a little USO today, and continue to accumulate more USO over the next few months as oil searches for its bottom. USO very likely may be lower in the near future than it is today, so that is why you want to nibble a little bit here and there over the next few months rather than buy it all at once today.
As with all my picks, remember that diversity is KEY! Never devote more than 10% of your portfolio to any given sector or industry, no matter how much you may love it. And if you are investing in individual companies, a good rule of thumb is to never devote more than 1% of your portfolio to any one company! With USO, I would at most allocate a few percent or so by the time you are done accumulating. There are lots of other great investments out there that I will continue to talk about as we move forward.
The main risk with USO is that it is 100% NOT diversified. It is one investment, a commodity investment, and that commodity is crude oil. I like it because it is liquid (no pun intended), meaning that it is easily traded and a heck of a lot less trouble than filling up a tank in your back yard with oil and then having to try to find a Chinese investor to come and buy it from you 5 years from now or whenever the price is high enough to warrant a sale!
Another key play on the energy sector going forward is XES, the SPDR S&P Oil & Gas Equipment & Services ETF. It too appears to be making a bottom this winter and I continue to accumulate it as well.
More on why I love USO later. But for now, note that I have gone on the record that I am now buying oil!
Gregory
Hi everyone,
I am short on time this morning but I wanted to announce that as of today's opening bell I have purchased my initial stake in USO, which is the United States Oil Fund (an ETF). This fund buys oil futures contracts on a rolling basis; they hold the near month contract until it is about to expire and then sell it to buy the following month's contract (or something very similar to that strategy, but read USO's prospectus to get the complete details). The point is that buy owning USO you have a stake in the oil futures market without having to manage the buying and selling of futures contracts yourself.
As with everything I recommend, I do not recommend putting too much of your money in USO because diversity is the best way to achieve a positive risk-adjusted return in the long run. But I do think that crude oil and the greater energy sector are starting to make a bottom now. In my opinion energy is one of the key sectors that I expect to outperform the market in the next 2-10 years.
Bottom line...buy a little USO today, and continue to accumulate more USO over the next few months as oil searches for its bottom. USO very likely may be lower in the near future than it is today, so that is why you want to nibble a little bit here and there over the next few months rather than buy it all at once today.
As with all my picks, remember that diversity is KEY! Never devote more than 10% of your portfolio to any given sector or industry, no matter how much you may love it. And if you are investing in individual companies, a good rule of thumb is to never devote more than 1% of your portfolio to any one company! With USO, I would at most allocate a few percent or so by the time you are done accumulating. There are lots of other great investments out there that I will continue to talk about as we move forward.
The main risk with USO is that it is 100% NOT diversified. It is one investment, a commodity investment, and that commodity is crude oil. I like it because it is liquid (no pun intended), meaning that it is easily traded and a heck of a lot less trouble than filling up a tank in your back yard with oil and then having to try to find a Chinese investor to come and buy it from you 5 years from now or whenever the price is high enough to warrant a sale!
Another key play on the energy sector going forward is XES, the SPDR S&P Oil & Gas Equipment & Services ETF. It too appears to be making a bottom this winter and I continue to accumulate it as well.
More on why I love USO later. But for now, note that I have gone on the record that I am now buying oil!
Gregory
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