ewilcox
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Hi All
I'm not sure if this is the best place to post on the subject of ETF's tracking Oil so apologies if not correct...
Anyway in the near future I will be in a position to invest a small amount of money. I would like to effectively tie this investment to the price of oil over the next few years. I am not totally concerned with the day to day movement but rather the long term trends which (rightly or wrongly) think will be in one direction. I've considered a portfolio of Oil company stocks (BP, Shell, Cairn etc) as a suitable way to achieve this but realised there are two problems. Firstly these companies prospects are in the medium term possibly not so good as reserves dry up and they are probably forced to merge to survive. Secondly each will be subject to its own fortunes which may be entirely different from the sector as a whole. My next consideration was to use an ETF tracking Brent or some other index. The only downside to this is as far as I can tell is while they roughly track the commodity the tracking is never that good. For example if crude rises 30% the EFT only rises 20-25% according to my calculations. So my first question is why is the tracking so poor? Secondly, for this reason, I was wondering what other alternatives there might be that I haven't considered? Ideally any investment will be OTC, track the price of oil as closely as possible, have little or no management fees and finally be easy to trade from the UK.
Thanks in advance,
ew
I'm not sure if this is the best place to post on the subject of ETF's tracking Oil so apologies if not correct...
Anyway in the near future I will be in a position to invest a small amount of money. I would like to effectively tie this investment to the price of oil over the next few years. I am not totally concerned with the day to day movement but rather the long term trends which (rightly or wrongly) think will be in one direction. I've considered a portfolio of Oil company stocks (BP, Shell, Cairn etc) as a suitable way to achieve this but realised there are two problems. Firstly these companies prospects are in the medium term possibly not so good as reserves dry up and they are probably forced to merge to survive. Secondly each will be subject to its own fortunes which may be entirely different from the sector as a whole. My next consideration was to use an ETF tracking Brent or some other index. The only downside to this is as far as I can tell is while they roughly track the commodity the tracking is never that good. For example if crude rises 30% the EFT only rises 20-25% according to my calculations. So my first question is why is the tracking so poor? Secondly, for this reason, I was wondering what other alternatives there might be that I haven't considered? Ideally any investment will be OTC, track the price of oil as closely as possible, have little or no management fees and finally be easy to trade from the UK.
Thanks in advance,
ew
