Energy Investing For Retail Investors

By Kristen Baird

Fuel sources are utilized in providing power to nation states. Sources of fuel encompass natural gas, coal, crude oil, wind and sunlight. Natural gas, coal and crude oil are often referred to as the more traditional fuel sources. Wind, sunlight and wave power sources, often called renewable energy sources have been utilized much more in recent times. Many governments consider access to power so vital that it often falls under the national security banner. Energy investing is important in the finance world.

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 product of the crude oil refinery process. It is used to heat homes. Many of the newer built housing units use electricity as the primary heating source. Heating oil is often used in older housing stock. Whether homes are heated by oil, gas or heating oil, prices do fluctuate during the year.

The energy segment within financial markets is one amongst many other segments dealing with different disciplines. Investors can purchase stocks, shares and exchange traded funds in all the various segments that contribute to modern economies. Some of these segments include healthcare, retail, transportation and technology. Diversification is good investment practice.

Institutional and retail investors who put money to work in the power generation related industry have various routes they can take. Some invest in retirement funds that focus only on the power related sector. Others buy stocks in energy related business entities. These stocks are issued by specialist companies that earn income from activities in crude oil extraction, refinery, exploration, tanker operations and other specialized processes.

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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