Different Types Of Energy Investments

By Cleveland Jernigan

Energy is important to every person and to every industry. We need fuel for our cars and electricity for our homes and businesses. We are dependent on some type of energy and while our dependency might seem like a weakness, when it comes to investing, it can be a benefit. Investing in some type of energy can be an excellent way to increase the value of your financial portfolio.

There are many types of energy investments. You can purchase stock in a specific energy company or invest in some type of energy mutual fund or an exchange-traded fund that concentrates its holding in the energy sector. There are advantages to each of these types of investments.

The stock market has rebounded somewhat from its instability of a few years ago, but it still can be a risky venture. There is great potential for high profits or just solid and steady growth, but there is always the possibility that your stock could plummet in value at some point. This is why it is important to research any company in which you hope to invest and perhaps speak with a financial planner or advisor.

Funds, either mutual funds or exchange-traded funds (ETFs), can be a safer investment in general. Mutual funds and ETFs are diversified investments, which means that rather than investing in one company, the shares you buy are invested in many different companies. This lowers the risk, but doesn't guarantee that you will make a profit. Funds typically don't have a high of a potential return on investment as buying stock in one company, but generally your losses will be far less significant.

While both ETFs and mutual funds are diversified and professionally managed, there are some differences. Because mutual funds have been around for many more years, the management of these funds is typically a bit better and there are more to choose from. ETFs are fairly new to the investment scene, but they offer some tax advantages, and the fees you pay when you sell are generally lower. In addition, the value of an ETF fluctuates during the hours of trading, so potentially you might enjoy a higher profit if you sell shares during trading. The value of the mutual fund, however, is fixed at the end of each trading day.

No matter where you decide to place your money, there are hundreds of choices to consider. There are stocks and funds based on natural resources including coal production, oil production and natural gas. There are also investment opportunities in alternative sources of energy, including hydroelectricity, wind power and solar power.

You also can invest in energy companies in a specific region. For example, you might find a China fund or Asia Pacific fund that concentrates its holdings in energy-related companies. Perhaps you would prefer to invest in the natural resources of Africa or South America. Of course, you can also invest in American energy companies as well. There is definitely something out there for every type of investor.

About the Author:

Cleveland Jernigan enjoys blogging about investments. To get further information regarding investing in energy funds or to know more about renewable energy funds, visit GAFunds.com now.