Resource and commodity stocks in general should make up only a limited portion of your portfolio—say less than 20% for a conservative investor or as much as 30% for an aggressive investor. And as part of that segment, energy stocks could make up, say half of that total. The rest could be fertilizer stocks, mining stocks and so on.
Oil and gas stocks have been below-average performers lately, and many investors are tempted to get out of the industry altogether. However, the energy sector can play a crucial role in your portfolio as a hedge against inflation. The low inflation rates of the past couple of decades deserve some of the blame for the poor performance of the sector. However, energy stocks will likely rebound in years to come as the global economy recovers.
- Invest mainly in well-established companies;
- Spread your money out across most if not all of the five main economic sectors (Manufacturing & Industry; Resources & Commodities; Consumer; Finance; Utilities);
- Downplay or avoid stocks in the broker/media limelight.
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How we recommend investing to find the best energy sector stock
An energy sector stock operates in the commodities business, so it’s hard for any one of them to build a lasting advantage over their rivals. But the ones that do can dominate their markets.
Energy stocks include businesses engaged in the exploration for, extraction and delivery of energy sources such as natural gas, oil, uranium and coal, as well as alternative and renewable energy sources.
The true story on mining stocks Mining stocks play a key role in your portfolio whether commodity prices are up or down.... |
