The Larger Fund Families Such As Fidelity, T

Category: Finance, Personal Finance.

It s hard to believe with oil approaching$ 100 per barrel, but the U.

We keep craving more regardless of the price. S. will consume over 1 billion( that s 1, 000, 000, 000) more gallons of gasoline in 2007 than in 200 As a certain President once said, we are energy junkies. Ask yourself this: Are you plugging more stuff into the wall each year? China, India and the other new economies also consume more energy each year. That requires even more oil, natural gas or coal. Political instability in Nigeria, and Venezuela could, Iran limit supply.

I m not suggesting we ll run out but it will become more expensive to extract it. And, there s only so much oil( natural gas and coal) in the ground. How can you ease the pain every time you fill up? By investing in energy companies. Or better, how can you benefit from higher energy prices? There are two ways to do this.

The sector mutual fund is the" pure play. " It holds energy stocks and, stocks of minerals, probably i. e. , iron ore and copper, mining companies. You can buy a Natural Resources sector fund or you can buy a Value fund which holds energy stocks. The risk with a sector fund is that there aren t a lot of them to choose from and they aren t diversified. A sector fund is diversified within its focus area, i. e. , owns a number of energy and mining companies, but any fund which investors in only one part of the economy is inherently riskier then a broadly diversified mutual fund. Don t get me wrong. The other way to" play energy" is through a large cap or mid cap value fund.

The downside of this approach is that value mutual funds have only a portion of their assets invested in energy stocks. These funds typically have some energy exposure. With either a Natural Resource fund or a Value fund( or any fund, for that matter) , don t just go by the name. Drill down( no pun intended) and check the fund s holdings to see if they match your expectations. Different fund managers view and approach their mandates differently. You can do this by going to the fund s website for a complete list of its holdings.

Your broker, Schwab is a good example, also may have this information on line. Lists of the top rated Natural Resource and Value funds can be found on websites such as Morningstar, Value Line and, Lipper MUTUALdecision. The larger fund families such as Fidelity, T. Which investing approach is right for you? Rowe Price and Vanguard all have Natural Resource and Value funds and may have information on others, as well. It depends upon how much risk you re willing to take and how your other assets are invested( think diversification of your entire portfolio) . Having an energy investment might ease the pain the next time you fill up.

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