With the world in chaos due to the coronavirus outbreak, now is the perfect time to buy oil stocks. Known as “black gold”, oil has been a steady asset throughout history and its value is still largely tied to supply and demand.
In recent weeks, the market has been thrown into uncertainty as demand is nearly certain to decrease while demand plummets and pandemic-related uncertainty remains pervasive. Investors should not be scared off by the situation and may even find it advantageous. After all, with the price of oil tumbling and profits nearly nonexistent for oil producers, now is the perfect time to buy.
This logic follows the unorthodox yet wise adage of “Buy when there’s blood in the streets”. Such a strategy allows investors to pick up valuable assets when they are at ridiculously low prices, thus profiting when the market stabilizes and turns around over time. With the oil market as low as it is due to the coronavirus, this strategy may offer huge returns in the future.
In addition to investing in oil stocks themselves, investors can also buy ETFs that offer exposure to oil companies. These ETFs are very low-cost investments that merely track the price of oil-producing companies instead of directly owning them. Alternatively, a futures contract also offers investors a chance to partake in the volatile commodity without actually owning oil. Through a futures contract, investors can purchase a contract that entitles them to the delivery of a fixed amount of oil at a specified future date.
Oil has a colorful past, to say the least. It has been a major component in wars and has swayed many a political alliance. Such events paint a rather clear picture that oil is essential and has become the metaphorical “new gold” of our century. As investors, now is the time to take advantage of the current market dynamics and buy when there’s blood in the streets as it relates to the oil market. A decision like this could potentially reap substantial rewards in the future.