Key Factors to Oil and Gas Investing

(Source: Wright Brianna)

In the last few years, we have seen a tremendous rise in investment in oil and gas. A major reason for this might be the tragic scenario in the share markets across the globe, which has forced many investors, to look out for alternative avenues of investments. As it is, oil and gas investment requires a keen sense of judgment on the part of the investor in determining what oil and gas stocks he should invest in.

Now, before you decide to invest in any particular stocks, such as the oil sands stocks, or the Canadian oil stocks, you need to take care of a few aspects. The following are some of the aspects, which you need to consider, before you go ahead with your investment:

1. First and foremost, your decision should be based on facts rather than market sentiments. That does not at all imply that you have to go against popular views; but it is always better to go by a logical analysis, instead of mood swings.

2. The most common saying that is very much applicable in Oil and Gas investment is; do not keep all your eggs in one basket. So, as it is in this case, it is advisable to diversify your portfolio and not pin all your hopes on a particular area. This would not only help you gain in the long run, but would also lower the risk factor as well. In fact the more diversified is your portfolio, the lower are your chances of loss.

3. Make sure that your research is not limited to simply market reviews. Do what most people rarely do, i.e. read journals and know about latest research and development projects as well as new patent rights which have been registered. This would give you a fair idea of promising prospects. Apart from that, make sure that you know bout the recent findings in regard to oil and natural gas reserves.

4. A common mistake which you should always avoid is investing your cash reserves, all at one time. You should always have some spare reserves, to bail you out of difficult times. Spare reserves may also play a great role in maximizing your returns as well.

Apart from the above factors, there are several other factors, which may help you in making the right kind of investment. Make sure that you do not buy overpriced stocks. For this you may check the price earning ratio. Apart from this, another factor which plays an important role is commodity prices. So, if you are looking forward to long term investment in oil and gas, then you do not have to worry much about the commodity prices. In case if you are focusing on short term investment, then in that case, commodity prices become extremely important.

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