Tuesday, September 16, 2014

Benefits And Risks Of Oil Well Investment Opportunities

By Kerri Stout


It is actually lucky for people to have a chance to earn money. It should not be taken for granted. If you have lots of options that you can choose from, then you better look for oil well investment opportunities. This is because investing in this product allows you to enjoy various benefits. Here are examples of the benefits you can enjoy.

Diversification. Everything in this world nowadays is being fueled by oil. Thus, when this product goes up in price, then everything on the board will go up too. When this product goes down in price, the same thing happens with the cost of the other goods. It would be a useful diversifier for you if you have this among your stocks.

Tax advantage. You can surely enjoy some tax advantages if you invest in this goods. You can get a deduction for depletion from the IRS. The said deduction is meant as an allowance that is quite similar to depreciation in rental real estate. Of course, there are other tax advantages that you can certainly use with that.

Profit potential. Whether you are investing in a small company or in a limited partnership, you can expect a good payoff. Investing in this kind of product will let you generate more profit, especially when that company strikes oil. The dividend pay off will give you a good source of income for many years.

While there are many advantages to this kind of investing, you should be aware of the disadvantages that comes with it too. Unlike the other products, you can presume that the disadvantages of investing in this product can be quite devastating if you are on the losing end. Here are some of the disadvantages which you need to prepare yourself for.

First, volatility. While this product might be the cause for other product's prices to go up or down, you can say that this product itself has wild price swings. This means that the price for this product will fluctuate without any warnings. There are even times when, due to the wild price swings, the investor loses more than fifty percent.

Liquidity. If you have your stocks in a large enterprise, then selling your stocks or shares can be a quick work. However, it will be a different matter if you have your stocks or shares in a small enterprise or limited partnership. You should not get yourself involved in such a company if you are not willing to tie up your money for a long period of time.

Commissions. A commission is a necessary payout you have to provide a broker or intermediary if you are trying to buy a stock in a smaller company or in a limited partnership. The commission can be very large, depending on the kind of company you are working for.

Brace yourself for the complexity of this investing transaction. Investing in this product will actually become difficult, especially if you have to understand the rules and regulations that govern this investing. There are tax complexities you have to deal with too. If you cannot do this right, you will draw the short end of the stick.




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