Wednesday, January 14, 2015

Oil Prices - Should I invest in Oil Stocks in Canada

We all know, especialy the people of Alberta, that oil prices have hit record lows and are bound to go further down for the next few months atleast. Many would have considered investing in oil stocks to reap higher returns at a later stage. That is not a bad idea at all and is definitely something investors should consider. BUT... here's another question. What sector of oil and gas we should invest in. To me, we need to look at this from another angle and rephrase the question as , "What sector of Oil and Gas has been affected the most".

We know services companies, such as drilling, have been affected the most. Now let's relate this answer to our previous question i.e. what sector of oil and gas we should invest in?. Answer is Service companies.

Let's talk about the reasoning of this answer:

Since service companies have been hit badly so the stock prices must be at the lowest, and we could wait few more months to get the best buying rates on stocks. Lower the cost higher the return, we all know that rule, don't we!

Another logical reason is, whenever oil and gas industry is hit with low market pricing, the first thing that stops is drilling. Vice versa i.e. As soon as Oil and Gas prices start to go up, first thing that starts is drilling again. So no matter how the market may respond to expected higher prices at a later date, drilling comapnies will start operating and will start making money, hence higher stock prices.

Since, I am myself a risk averse investor and like to play it safe, I'd recommend to save some money for the 'bad times' that may come because of the worsening market conditions of oil and gas, which ultimately affect every other industry, and then invest the rest on oil stocks or any other investments you may find interest in.

Happy Investing!!

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