April 6th, 2012
The standard investment portfolio is ordinarily comprised of stocks and bonds. These are essential elements of a strong long-term investment strategy. Nonetheless, there are non-mainstream investments that you can make use of to complement your portfolio while providing you with the opportunity to mitigate the results of market volatility and fluctuations. All of these are referred to as alternative investing, and they include hedge funds, mutual funds and commodities like oil and gas.So what is alternative investing? These asset classes do not move with the typical equity and fixed income markets. Therefore, they follow their own trend. Alternative investment resources have a low correlation with the typical asset category; thus, you can use them to diversify your portfolio by reduction of its movements during times of weak performance.Alternative investments have been restricted for a long period to high net-worth individuals and institutional investors. However, nowadays , they?re readily available to any investor. So, you may use all these assets to complement many different investment techniques even though they?re designed to enhance heavily funded portfolios.Taking into account gas and oil for alternative investing To invest in oil and gas, you need to begin with determining the gas and oil stocks which are worth putting cash in. To do that, you must give attention to stocks with high results opportunities. Here are 3 key factorsthat you should think about reviewing when investing in gas and oil stocks.i.The valuation of stock This is the first factor that you must look at when identifying the proper stock since most oil stocks are often over valued. Be sure to look at the stock?s price earning; which is a trustworthy indicator of the value of the oil stock.ii.Natural gas vs. OilYou must always be conscious of the natural gas to oil ratio in your stock interest. This is important when you wish to purchase any gas focused oil when gas costs are at an all time high. Obviously, this isn?t the right time to buy this stock. However, you might consider selling off your stock depending on what future predictions on gas rates are.iii.Trust units vs. Common shares Lots of gas and oil stocks generally convert to trust units as a way of protecting tax to unit holders. Hence, if you wish to invest in an oil stock that will provide you with a steady cash flow, then the oil stock with a trust unit need to be your choice.Alternative investing can increase your portfolio?s returns while lowering its market exposure and the overall volatility. Nevertheless, you need to just use them as a complement to the mainstream portfolio that is made up of equities and fixed income investments.
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