Which fund to catch some upside from a possible rise in the price of oil?

BrockStoker

So I have some cash waiting in my portfolio and would like to make the most of any future upturn in the oil markets. I was considering the MFM Junior Oils fund, but with the share classes available on my platform I either have to pay an initial fee of 5.25% and asset AMC for the dirty share class, or invest £50K minimum for the "I" share class although the AMC is 0%.

The problem is that I don't really want to put £50K (a little over 10% of my total investment portfolio value) in one go. I would rather invest £15-25k to begin with, so if the price falls further I can top up with another £15-25k. I also don't want to pay 5.25% initial fees + AMC, although then I could invest under £50K to begin with and top up again later if needed.

So instead I've been looking at this ETF which has no initial minimum, no initial fee, and only a small AMC: ETFS Brent Oil 1 month ETC (GBP)

http://www.morningstar.co.uk/uk/etf/snapshot/snapshot.aspx?id=0P0000AATV

Would a fund like this one be a better idea instead? Are there any hidden risks with a fund like this vs MFM Junior Oils?

Since I have a reasonably long term investment horizon (at least 10-15 years if not 20), I'm happy to take a bit more risk to begin with, and I think I need to if I am to get close to meeting my targets which are probably a bit over optimistic (to double my portfolio value in 5-10 years whilst paying me ~2.5% income per annum). I already have about 10% of my portfolio in Biotech/Healthcare, and the rest is equities mostly in the UK (60%), Japan (10%), and India (<5%). I know I'm lacking in US/Europe, but I'm not keen on investing in those regions just yet.

planteria

i would look carefully at some individual shares..
but fwiw i don't expect a rise in the oil price any time soon.
[though i would love one, as i am involved in renewable energy alternatives, and invested in an oil company].

chris_m

You could lay down a stock of http://www.mazola.com/products/corn-oil.aspx
:rotfl:

george4064

Have a look at the list of Oil ETFs here; http://www.hl.co.uk/shares/exchange-traded-funds-etfs/list-of-etfs?companyid=&tab=prices&sectorid=356&tab=prices&etf_search_input=

BrockStoker

planteria wrote: »

i would look carefully at some individual shares..
but fwiw i don't expect a rise in the oil price any time soon.
[though i would love one, as i am involved in renewable energy alternatives, and invested in an oil company].

Thanks, but I'd rather stay away from shares, at least for the moment. My platform does not allow share dealing and although I have looked into setting up another platform that would allow me to buy/sell shares, it's something that will have to wait for the time being.

Also, as I'm not very familiar with oil companies, I think picking individual shares would likely be a lot too risky/hit and miss for me compared to investing in a fund, especially in the current environment where it seems that quite a few companies are teetering on the edge. Whilst I could just about stand my whole investment in oil becoming worthless, I think there's much less chance of that happening with a fund?

BrockStoker

george4064 wrote: »

Have a look at the list of Oil ETFs here; http://www.hl.co.uk/shares/exchange-traded-funds-etfs/list-of-etfs?companyid=&tab=prices&sectorid=356&tab=prices&etf_search_input=

Thanks, but I only have a limited range available on my platform, and unless there's an oil ETF that would make much better sense that the one I have been looking at, then I can't really see a reason to make a request for the ETF to be added to my platform.

grey_gym_sock

sounds like gambling to me. now, an appropriately sized bit of gambling (which i doubt this is) may give you a shot at hitting an implausibly high target return - but only because, if it fails, you'll miss the target by a larger margin than you would otherwise have done.

the ETF you mention holds futures on the oil price. have you read up on contango / backwardation, and so are aware that the price of oil futures don't move in the same way as the price of oil? (of course, the price of oil companies is something else again.)

jimjames

Which platform is it that has such restrictions?

BrockStoker

grey_gym_sock wrote: »

sounds like gambling to me. now, an appropriately sized bit of gambling (which i doubt this is) may give you a shot at hitting an implausibly high target return - but only because, if it fails, you'll miss the target by a larger margin than you would otherwise have done.

the ETF you mention holds futures on the oil price. have you read up on contango / backwardation, and so are aware that the price of oil futures don't move in the same way as the price of oil? (of course, the price of oil companies is something else again.)

I suppose it could be considered a borderline gamble, but then I can't see the oil price not recovering (at least partially) in the medium term, so would it really be that much of a gamble?

The main reason I posted this topic is because I don't know anything about contango/backwardation and the difference between oil futures/oil price.

However the performance of MFM Junior Oils and ETFS Brent Oil 1 month seems reasonably closely correlated when displayed on the same graph, so I'm thinking that although they have differences, the end results of investing in either should be more or less the same. Are the oil futures going to be inherently riskier though?

BrockStoker

jimjames wrote: »

Which platform is it that has such restrictions?

It's a bit of a strange one: rl360.com

bigfreddiel

BrockStoker wrote: »

It's a bit of a strange one: rl360.com

Why?

What does it give over and above the more widely accepted platforms?

Is your investment in an ISA wrapper?

fj