How do you know what industries to invest in?

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Investing need not be a difficult process, as long as the investor has done the proper research, consulted appropriate advisors and read as widely as possible about potential good investment options.

To be fair, there are a vast number of investment options that could be considered, but as any investor or potential investor should be aware, investments in the stock market, for example, can go down as well as up.

There are always risks to be considered when planning where – and when – to invest, and certainly there are many investors who may prefer to go down the relatively safe route of government bonds. Although returns may not be munificent with bonds, at least returns can be expected, but for those looking for greater financial rewards then research becomes crucial.

How to research for your investments

The wonderful thing about the internet is that it offers myriad opportunities to research any subject you want, so for information about potential good industries to invest in it is the perfect vehicle for exploration. However, before just concentrating on what the World Wide Web might deliver, it’s worth considering books that are available, written by investment experts to give a comprehensive guide into sectors where investment could be worth exploring in more detail.

One such book looks closely at the energy sector and what to look out for when thinking about investing in it. Fisher Investments on Energy can be found on Amazon and contains intriguing insights into the unique aspects of the sector, and what to look for when weighing the decision on whether to invest in the energy sector or not. It’s an extremely helpful guide for anyone who doesn’t know much about the sector.

One of the difficulties facing investors in making a decision is the volatility in the energy market. Until relatively recently, oil prices were high and it seemed as if investments would do well over a period of time. Returns from energy suppliers could be good as they kept prices high for consumers even though wholesale prices had dropped considerably.

Wholesale energy costs typically account for around half of a customer’s utility bills and the big supplier companies rarely, if ever, pass on a drop in price immediately. After all, they are looking to their bottom line. They will also hedge their oil and gas exposures, so will buy supplies in advance in the hope of reducing their customers’ exposure to rapid price changes.

A current difficulty for investors considering the energy sector is that oil prices have plummeted and show few signs of picking up significantly, at least in the short term. Thus, investments in major producing companies could prove difficult in terms of good returns at present. That doesn’t mean they should be avoided necessarily, but investors have to look at what level of risk they are comfortable with.

Shale gas

The development, particularly in the US, of “fracking” for natural gas contained in shale deposits – sometimes a controversial process – has led to a significant decrease in America’s need to import gas. The process is not cheap to achieve, but there are potentially good investment returns in the future, as the techniques for extracting it develop. In the UK, there is controversy over the process too but new laws allowing for exploration and extraction may mean that investment could be worth investigating more closely.

Peak oil and gas

In the end, oil and gas are finite natural resources, and though no one can specifically predict when they will run out it has been the reason for companies pursuing alternative energy sources, especially renewable ones.

Nuclear power still provides a significant amount of energy – France is a good example of this – but power stations are expensive and clean up of spent radioactive materials very costly. Much has been said about nuclear fusion as a power source to provide limitless, safe power, and though research continues into the process, there has been no breakthrough to date.

Renewables

It could be argued that renewable energy is ideal for investors, though getting the technology set up can be expensive in the initial stages, However, wind turbines have become a familiar feature in many places and though, obviously, they require wind for them to operate there are many who think this type of technology is ideal for the future as fossil fuel supply dwindles.

It’s also worthwhile for investors to consider energy from the tides, but that’s more likely to be a longer-term investment and will probably not give good short-term returns.

It’s important to continue to research, talk with experts and be clear about the risk appetite. Energy investment can be very rewarding if done in full knowledge of the facts.

 

 

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