How do I Choose the Best Oil Shares?

Trading oil shares on the stock market is a common choice for investors. Choosing the best oil shares to invest in is the product of knowing your personal investment style, careful research and a substantial amount of luck. To decide which oil shares have the greatest opportunity to maximize your profits, it is vital that you understand the forces that affect the price of oil and how to use this knowledge to guide your stock purchases.

There are pros and cons of investing in oil and, sometimes, what appears to be a downside might also be the silver lining of this investment type. The volatility of the oil share prices on the stock market is an example of this pro/con dilemma. The price of oil is controlled by the same economic laws of supply and demand that control all pricing paradigms. When oil shares rapidly inflate or deflate in price, an investor can either make a lot of money or go bankrupt. Depending on your personal investment style, this volatility in the price of oil can prove to be your greatest asset or your biggest headache.

For those who prefer a slow rate of growth for their investment, with a greater margin of safety, buying oil shares from companies with an established history of returns is often the safer choice. Although any investment will put the investor's money at risk, these established oil companies have demonstrated stability and longevity in the oil industry. If you want to invest in oil shares without having to stay at your computer watching the stock market ticker feeds all day, this type of oil share is probably your best option.

If your investment style is a bit more down and dirty, with the ability to take a bigger risk for the chance at a fast profit, a different type of oil share, the so-called penny stock, might be more to your liking. Given the nickname "penny stocks" for their low issue prices, these oil shares represent a huge opportunity for the investor. An investment of a few hundred US Dollars could buy several thousand oil shares from one of these companies as opposed to just a few shares from one of the more established oil companies.

Unfortunately, oil shares that fall into the penny stock category are usually issued by new oil companies with little or no demonstrated success. When these companies do well, your small investment to purchase a few thousand shares can become a goldmine. The reverse is also true, however, and you might find yourself sitting on several thousand worthless oil shares if the company goes bankrupt while you are out to lunch.

In either type of oil share investment, it is vital that you carefully research the company in which you intend to invest. Read all of the information provided in the prospectus declarations and news items about the oil company in which you are considering buying oil shares to ensure that the company falls within the bounds of your personal investment comfort zone. By doing so, you can choose the best oil shares for your investment strategy.