This Oil ETF Is Worth Investing In (DBO, USO, OIL)
So many ETF’s with different characteristics to invest in but, when considering oil related ETF’s PennySleuth covers which is best. “Oil prices have fallen through the floor in the last year – a 41% drop to be precise… That’s exactly why the coming rise in oil prices is bound to be the story of the summer. And today, I’m going to fill you in on the smartest way to profit from higher prices at the pump,” Jonas Elmerraji Reports From Penny Sleuth.
Elmerraji continues to say “There are a large number of oil and oil-related ETFs trading on the market right now –including funds that invest in oil futures and those that hold shares of oilfield service companies. But investing in oil through companies that service oil producers is a risky play; as the Exxons of the world continue to see their margins evaporate, they’ll be unlikely to enter into many major development obligations that these companies live on. Right now, there are only three oil futures ETFs trading on the market: the U.S. Oil Fund ETF (NYSE: USO), the PowerShares DB Oil Fund ETF (NYSE: DBO) and the iPath S&P GSCI Crude Oil Total Return Index ETN (NYSE: OIL).”
“Commodity ETFs have taken a lot of heat recently because they don’t perfectly track their underlying commodities. In the last 4 months, for example, the spot price of crude oil has risen 36%, while USO has only rallied 28%. One of the biggest reasons for the huge tracking error is what’s known as “roll yield”. Because futures have expiration dates, USO’s administrators have to constantly trade in their old futures for new ones. Unfortunately, because of the way future prices change over time, they often post a small loss on each position as they roll into the next futures contract,” Elmerraji Reports.
The ETF that they consider the best for following oils path is DBO, as they state below:
“This ETF, which is based on the Deutsche Bank’s Optimum Yield Oil Index, uses the an optimum yield formula to replace expiring futures contracts with contracts that have the highest possible positive roll yield. And even with the added yield advantage, DBO’s expenses are 37% cheaper than USO’s. While even DBO can’t track the spot price of oil perfectly, the ETF is the only fund worth considering if you want to invest in oil. And the technicals suggest that right now is the time to open a position,” Jonas Elmerraji Reports.
FULL STORY: HERE
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DBO, ETF BASIC NEWS, OIL, USO
