How Does a Small Investor Make Money on Low Oil Prices in the Long Term?


Quick Answer

Small investors can make money on low oil prices in the long term by buying oil-market shares that are currently widely available at considerably decreased prices, and then holding them until the oil market recovers, according to James Burgess for Oilprice.com. This needs to be a long-term investment strategy for best results.

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Full Answer

Small-cap stocks, which are shares in smaller companies, have historically performed better than big-cap stocks in the long run during periods when stocks decline regularly or remain persistently undervalued, explains Burgess. The sharp drop in the prices of oil shares that took place in the second half of 2014 has created a market that is very promising in the long term for small-cap oil stocks. Expert analysts assert that small-cap oil stocks, which in that past years have not performed as well as the big-caps, will eventually regain their historically consistent performance superiority over the big-caps.

According to some financial advisers, however, the price of oil shares will continue to decrease in the immediate future, reports Everett Rosenfeld for CNBC. This presents remarkable opportunities for small-time investors and substantial risks, because although these financial experts agree the prices of oil shares eventually will rise again, no one is quite sure when prices will hit bottom or how long the recovery may take.

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