Energy Mutual Funds – Oil, Natural Gas, or Biofuel?

Energy Mutual Funds

When it comes to energy mutual funds there are a number of choices and sectors available. Many funds invest in oil, others choose natural gas. Some funds and investors put their capital in the biofuel sector, and a number of funds are blended so that two or even all 3 of these energy sectors are covered in a single investment vehicle. Every investor is different, and the perfect sector and fund choice for one may be the worst possible choice for another. Within each energy sector there are a wide range of fund choices, and each one will have various risk levels and potential returns that need to be researched, examined, and compared. All 3 energy types have certain advantages and drawbacks and each of these will also need to be compared and evaluated.

Energy mutual funds that choose oil as the investment vehicle have the advantage of being very well known. Oil companies make record profits in most cases but this sector has seen some terrible publicity in recent years. Even though oil funds are still very profitable for many investors some individuals choose to avoid this sector in an effort to go with a greener alternative. Large oil spills tend to upset the public and cause public relations nightmares for the companies involved, and lawsuits threaten to eat up a large part of future profits in some cases. For many investors the desire for good returns and a solid performance history override any environmental concerns though, because funds that specialize in oil have usually done very well in the past.

Natural gas energy mutual funds are also a popular choice for investors, but this sector also carries some risks. Natural gas is abundant in the USA and this large supply combined with environmental factors that include unusually warm weather during the winter months have caused the prices to drop. Some funds that specialize in natural gas and have a portfolio very heavy in these holdings have seen losses due to the price drop and a lack of increased storage capacity for this fuel. This does not mean that natural gas is not a solid investment for some investors, just that this sector is not right for everyone and the right choice may be different in each case.

Biofuel energy mutual funds invest in biofuel sources, technology, and companies. Biofuels can include solar power, wind power, hydrogen energy, hydro power, algae fuel sources, and many others. These technologies range from new to very old and many investors believe that fossil fuel sources like oil and natural gas will become obsolete in the future. Some of these investments are profitable, while others are not as the Solyndra scandal showed. Because every investor may have different goals and objectives, and be willing to take varying degrees of risks, the right energy sector choice is crucial for successful results. Performing the necessary research and fund evaluations will help each investor determine if an oil, natural gas, biofuel, or blended fund is the best possible pick given all of the circumstances and factors.