Admit it – you’re tempted to invest in some energy exchange traded funds (ETFs). After all, gas and oil are hitting record highs and rising.
It’s only natural that you would be, because investors tend to buy what they know. The United States, McDonald’s, Disney, Target and so on. There’s comfort in the familiar.
But trying to profit from energy isn’t without its pitfalls, says Tim Paradis for the Associated Press. Many investors already invest in the sector by owning stock of the biggest oil companies, while others dive right into the commodities market and trade futures contracts.
One portfolio manager warns that the corrections in this sector can be brutal. Since 2004, he says, there have been at least two big corrections per year.
And then there’s this paradox: those hardest hit by skyrocketing energy aren’t likely to have lots of extra cash sitting around with which to invest.