How can I buy shares of oil? I'm told it's done through ETFs. How's that related to oil prices per barrel?
While we're not supposed to make direct recommendations, and I am in no way advising anything, USO an ETF that buys light sweet crude oil futures with the intention of mirroring the price movements of oil. The papers you would need to buy are called 'futures', and they give you the right to buy (or sell) a certain amount of oil at a certain location (some large harbor typically), for a certain price, on a certain day. You can typically sell these futures anytime (if you find someone that buys them), and depending on the direction you bought, you will make or lose money according to oil rice changes - if you have the future to get oil for 50 $, and the market price is 60, this paper is obviously worth 10 $. Note that you will have to sell the future at some day before it runs out, or you get real oil in some harbor somewhere for it, which might not be very useful to you. As most traders don't want really any oil, that might happen automatically or by default, but you need to make sure of that. Note also that worst case you could lose a lot more money than you put in - if you buy a future to deliver oil for 50 $, and the oil price runs, you will have to procure the oil for new price, meaning pay the current price for it. There is no theoretical limit, so depending on what you trade, you could lose ten times or a thousand times what you invested. [I worded that without technical lingo so it is clear for beginners - this is the concept, not the full technical explanation]
You can look at it from a fundamental perspective to see who benefits from rising oil prices. That's a high level analysis and the devil is in the details - higher oil prices may favour electric car producers for example or discount clothes retailers vs. branded clothes manufacturers. Another approach it to use a statistical analysis. I have run a quick and dirty correlation of the various S&P sector indices against the oil prices (Crude). Based on the the results below, you would conclude that materials and energy stocks should perform well with rising oil prices. There again, it is a behaviour you would expect at the group level but it may not translate to each individual company within those groups (in particular in the materials sector where some would benefit and some would be detrimentally affected). You could get exposure to those sectors using ETFs, such as XLB and XLE in the US. Or you could run the same analysis for each stock within the S&P 500 (or whatever index you are looking at) and create a portfolio with the stocks that are the most correlated with oil prices. This is calculated over 10 years of monthly returns after removing the market component from the individual sectors. The two important columns are: "It's standard to price oil in US$.  That means that if the US$ gets stronger, the prices of oil drops even if its ""intrinsic value"" remains constant.  Same thing happens for other commodities, such as gold.  Think of the oil price in barrels/$.  If the denominator (value of the $) goes up, then the ratio tends to go down." I don't know why stocks in some industries tend to have lower prices per share than others. It doesn't really matter much. Whether a company has 1,000,0000 shares selling for $100 each, or 10,000,000 shares selling for $10 each, either way the total value is the same. Companies generally like to keep the share price relatively low so that if someone wants to buy a small amount, they can. Like if the price was $10,000 per share, than an investor with less than $10,000 to put in that one stock would be priced out of the market. If it's $10, then if someone wants $10 they can buy one share, and if someone wants $10,000 they can buy 1000 shares. As to why energy stocks are volatile, I can think of several reasons. One, in our current world, energy is highly susceptible to politics. A lot of the world's energy comes from the Middle East, which is a notoriously unstable region. Any time there's conflict there, energy supplies from the region become uncertain. Oil-producing countries may embargo countries that they don't like. A war will, at the very least, interfere with transportation and shipping, and may result in oil wells being destroyed. Etc. Two, energy is consumed when you use it, and most consumers have very limited ability to stockpile. So you're constantly buying the energy you need as you need it. So if demand goes down, it is reflected immediately. Compare this to, say, clothing. Most people expect to keep the same clothes for years, wearing them repeatedly. (Hopefully washing them now and then!) So if for some reason you decided today that you only need three red shirts instead of four, this might not have any immediate impact on your buying. It could be months before you would have bought a new red shirt anyway. There is a tendency for the market to react rather slowly to changes in demand for shirts. But with energy, if you decide you only need to burn 3 gallons of gas per week instead of 4, your consumption goes down immediately, within days. Three, really adding to number two, energy is highly perishable, especially some forms of energy. If a solar power station is capable of producing 10 megawatts but today there is only demand for 9 megawatts, you can't save the unused megawatt for some future time when demand is higher. It's gone. (You can charge a battery with it, but that's pretty limited.) You can pile up coal or store natural gas in a tank until you need it, but you can't save the output of a power plant. Note numbers two and three also apply to food, which is why food production is also very volatile. Buffet is in a different league from other value investors. He looks for stable companies with no debt and good management. Then he looks to deeply understand the industries of candidate companies, and looks for companies that are not in commodity businesses or sell commodities that can be bought for 25% of the valuation that he believes reflects the true value of the company. Deeply understanding the market is really the key.  Consider the Burlington Northern Santa Fe Railroad, which Buffet purchased last year. Railroads benefit from higher oil prices, as they can transport cargo much cheaper than trucks. They also tend to have natural monopolies in the regions they operate in. Buffet bought the railroad just as production of oil and natural gas in North Dakota started picking up. Since pipeline capacity between North Dakota and refineries in Texas/Oklahoma is very limited, the railroad is making alot of money transporting crude. "One reason is that it is not possible (at Vanguard and at many other brokerages) to auto-invest into ETFs.  Because the ETF trades like a stock, you typically must buy a whole number of shares.  This makes it difficult to do auto-investing where you invest, say, a fixed dollar amount each month.  If you're investing $100 and the ETF trades for $30 a share, you must either buy 3 shares and leave $10 unspent, or buy 4 and spend $20 more than you planned.  This makes auto-investing with dollar amounts difficult.  (It would be cool if there were brokerages that handled this for you, for instance by accumulating ""leftover"" cash until an additional whole share could be purchased, but I don't know of any.) A difference of 0.12% in the expense ratios is real, but small.  It may be outweighed by the psychological gains of being able to adopt a ""hands-off"" auto-investing plan.  With ETFs, you generally must remember to ""manually"" buy the shares yourself every so often.  For many average investors, the advantage of being able to invest without having to think about it at all is worth a small increase in expense ratio.  The 0.12% savings don't do you any good if you never remember to buy shares until the market is already up." 19 x 3.75 = 71.25... without having to actually pump oil, transport it, refine crude, and deal with the health hazards of it. Not bad.   Is this supposed to be a dramatic increase or decrease from the current market? Im not sure if im just being stupid, but I wish the article could involve financial comparisons of some sort... because I'm just mostly confused here. "Okay. An ETF is an ""Exchange Traded Fund"". It trades like a stock, on the stock market.  Basically by buying one ETF, you can have ownership in the underlying companies that make up the ETF. So, if you buy QCLN, a green energy ETF, you own Tesla, First Solar Inc, SunPower Corporation, Vivint Solar, Advanced energy industries and a bunch of other companies that are involved in clean energy.   It allows you to gain exposure to a sector without having to buy individual companies.  There are ETFs for lots of different things. Technology ETFs, Healthcare ETFs, Consumer Staples ETFs, Utilities ETFs, etc.  REITS are essentially the same thing, except they own real estate." "Wouldn't this be part of your investing strategy to know what price is considered a ""good"" price for the stock?  If you are going to invest in company ABC, shouldn't you have some idea of whether the stock price of $30, $60, or $100 is the bargain price you want?  I'd consider this part of the due diligence if you are picking individual stocks.  Mutual funds can be a bit different in automatically doing fractional shares and not quite as easy to analyze as a company's financials in a sense. I'm more concerned with the fact that you don't seem to have a good idea of what the price is that you are willing to buy the stock so that you take advantage of the volatility of the market. ETFs would be similar to mutual funds in some ways though I'd probably consider the question that may be worth considering here is how much do you want to optimize the price you pay versus adding $x to your position each time.  I'd probably consider estimating a ballpark and then setting the limit price somewhere within that.  I wouldn't necessarily set it to the maximum price you'd be willing to pay unless you are trying to ride a ""hot"" ETF using some kind of momentum strategy.  The downside of a momentum strategy is that it can take a while to work out the kinks and I don't use one though I do remember a columnist from MSN Money that did that kind of trading regularly." "Let's handle this as a ""proof of concept"" (POC); OP wants to buy 1 share of anything just to prove that they can do it before doing the months of painstaking analysis that is required before buying shares as an investment. I will also assume that the risks and costs of ownership and taxes would be included in OP's future analyses. To trade a stock you need a financed broker account and a way to place orders. Open a dealing account, NOT an options or CFD etc. account, with a broker. I chose a broker who I was confident that I could trust, others will tell you to look for brokers based on cost or other metrics. In the end you need to be happy that you can get what you want out of your broker, that is likely to include some modicum of trust since you will be keeping money with them. When you create this account they will ask for your bank account details (plus a few other details to prevent fraud, insider trading, money laundering etc.) and may also ask for a minimum deposit. Either deposit enough to cover the price of your share plus taxes and the broker's commission, plus a little extra to be on the safe side as prices move for every trade, including yours, or the minimum if it is higher. Once you have an account the broker will provide an interface through which to buy the share. This will usually either be a web interface, a phone number, or a fax number. They will also provide you with details of how their orders are structured. The simplest type of order is a ""market order"". This tells the broker that you want to buy your shares at the market price rather than specifying only to buy at a given price. After you have sent that order the broker will buy the share from the market, deduct the price plus tax and her commission from your account and credit your account with your share." That doesn't change anything. You're still judging an investment off a 5 year period which includes a massive event which destroyed oil stocks. My previous analogy still applies, if you held 2 portfolios, one with tech stocks and one without for the 5 year period that includes the tech crash in the early 2000s, of course the non tech one would outperform the tech one.  XLE, an energy etf, dropped 30% at the end of that period. That has an outsized influence on your article there. An index fund is inherently diversified across its index -- no one stock will either make or break the results. In that case it's a matter of picking the index(es) you want to put the money into. ETFs do permit smaller initial purchases, which would let you do a reasonable mix of sectors. (That seems to be the one advantage of ETFs over traditional funds...?) The only fee you incur when buying an ETF is the commission. If you have a brokerage account at Schwab/Fidelity/E-TRADE/Vanguard or any number of banks you won't pay more than $10 per transaction (regardless of the size of the transaction).  I use Schwab which charges $5 per trade, but you can open a Robinhood account (it's a discount brokerage) for free, $0 commission trades. It lacks features that paying platforms have, but it's great for beginners.   You'll get a dividend each quarter (every 3 months) for most ETFs. Concerning the Broker: eToro is authorized and registered in Cyprus by the Cyprus Securities Exchange Commission (CySEC). Although they are regulated by Cyprus law, many malicious online brokers have opened shop there because they seem to get along with the law while they rip off customers. Maybe this has changed in the last two years, personally i did not follow the developments. eToro USA is regulated by the Commodity Futures Trading Commission (CFTC) and thus doing business in a good regulated environment. Of course the CFTC cannot see into the future, so some black sheep are getting fined and even their license revoked every now and then. It has no NFA Actions: http://www.nfa.futures.org/basicnet/Details.aspx?entityid=45NH%2b2Upfr0%3d Concerning the trade instrument: Please read the article that DumbCoder posted carefully and in full because it contains information you absolutely have to have if you are to do anything with Contract for difference (CFD). Basically, a CFD is an over the counter product (OTC) which means it is traded between two parties directly and not going through an exchange. Yes, there is additional risk compared to the stock itself, mainly: To trade a CFD, you sign a contract with your broker, which in almost all cases allows the broker A CFD is just a derivative financial instrument which allows speculating / investing in an asset without trading the actual asset itself. CFDs do not have to mirror the underlying asset's price and price movement and can basically have any price because the broker quotes you independently of the underlying. If you do not know how all this works and what the instrument / vehicle actually is and how it works; and do not know what to look for in a broker, please do not trade it. Do yourself a favor and get educated, inform yourself, because otherwise your money will be gone fast. Marketing campaigns such as this are targeted at people who do not have the knowledge required and thus lose a significant portion (most of the time all) of their deposits. Answer to the actual question: No, there is no better way. You can by the stock itself, or a derivative based on it. This means CFDs, options or futures. All of them require additional knowledge because they work differently than the stock. TL;DR: DumbCoder is absolutely right, do not do it if you do not know what it is about. EDIT: Revisiting this answer and reading the other answers, i realize this sounds like derivatives are bad in general. This is absolutely not the case, and i did not intend it to sound this way. I merely wanted to emphasize the point that without sufficient knowledge, trading such products is a great risk and in most cases, should be avoided. First of all, you'll need a securities account. Nowadays, most large banks offer this as a standard product for all their customers, though it may require some extra paperwork. Then you need to buy shares in the ETF. This is indeed typically done through the stock market, but there are alternatives. Some banks will sell securities to you directly, but usually only those they create themselves (options and such). Some also offer ETF investment plans that allow you to buy shares for a fixed amount each month through the bank. In any case, the bank's online banking interface should support all these options. However, fees are an important consideration! With some banks, the securities account is free, others charge an annual fee. And the fees on stock market transactions and investment plans also vary considerably, so it could be worth it to consider some alternatives. "As others have alluded to but haven't said due to the lack of reputation points to spare, you can take advantage of oil prices by leveraging up and using as much credit and margin as the banks and brokerages (respectively) will lend you. People assume that the correct answer on this forum has to masquerade as conservative financial advice, and this is not advice nor conservative. Futures contracts are readily available, but they are expensive to obtain (like a minimum entry of $4,450). But if this expense is no such object to you then you can then obtain this contract which is actually worth 20x that and experience the price appreciation and depreciation of the whole contract. The concept is similar to a downpayment on a mortgage. You assume ""rock bottom"" oil prices, but fortunately for you, futures contracts will allow you to quickly change your bets from future price appreciation and allow you to speculate on future price depreciation. So although the union workers will be protesting full time after the drilling company lays them off, you will still be getting wealthier. Long Options. These are the best. The difference with options, amongst other speculation products, is that options require the least amount of capital risk for the greatest reward. With futures, or with trading shares of an ETF (especially on margin), you have to put up a lot of capital, and if the market does not go your desired direction, then will lose a lot. And on margin products you can lose more than you put in. Being long options does not come with these dilemmas. A long march 2015 call option on USO ETF can currently be bought for less than $200 of actual cash (ie. the trading quote will be less than $2.00, but this will cost you less than $200), and will be worth $1000 on a very modest rebound in prices. The most you can lose is the $200 for the contract. Compared to $4450 on the futures, or $100,000 (that you don't have) in the futures market if oil really moves against you, or compared to whatever large amount of cash needed to actually buy shares of an ETF needed to make any decent return. These are the most lucrative (and fun and exhilarating and ) ways to take advantage of rock bottom oil prices, as an individual."