A question about ETFS

[chriz0528]

When oil floors out at $90 to-4$100 dollars I was thinking of buying an exchange traded fund in crude oil, does that seems sensible?
With an ETF in oil for example it seems impossible to lose your money as oil can never goes to zero, so investing in ETF crude oil seems to provide a guaranteed win if you hold long enough , is that right?
Also just curious who owns ETFs, can the company that owns them go bust and then you lose your money? Or are they safe from collapse?

 

[chriz0528]

Are there any risks involved in buying exchange traded funds, can the fund collapse?

Guys I'm contemplating on investing all my money in crude oil ETF if oil should enter the $90 to $100 dollar band, any thoughts/comments on it? seems like a no lose investment, is it that easy?

 

[incrediblefx]

Now I'm more tempting to buy oil ETF but I can't find answer to what happens when the fund collapse.

 

[Ponce]

Now I'm more tempting to buy oil ETF but I can't find answer to what happens when the fund collapse.

After reading the first 2 posts,the question of fund collapse is silly.

 

[MrGecko]

It depends on what the managers of your ETF buy into... they might exclusively buy Oil in the cash market and store it, as alot of Gold ETF's do - in which case, the value of your shares in the ETF is usually the NAV of the Oil held by your fund. If the price of Oil -> 0, then the NAV of your position will be 0 (in fact, after storage costs and management fees, it might be less than 0).

On the other hand, your fund might invest in a range of assets that are exposed to the price of Oil - Energy comapanies, shipping companies perhaps, whatever in the managers view shares a fundamental relationship with Oil. If the "secondary" assets that your fund is invested in (such as energy stocks) fall out of the sky, expect your ETF to follow suit.

So in short, yes.

 

[raysor]

The ETFs run off the back of the oil futures.