Lots going on in the energy sector this week. Kent Moors and I always do our best to cover everything that's going onóboth the big stories and the little ones.
Yet our true focus isn't on the headlines.
The point of these articles is to give our readers useful and actionable guidance as they plan their oil- and energy-related investments. We want to dig up and deliver opportunities you can profit fromóat a time when profits are especially hard to pin down.
So today I want to take time out.
Instead of analyzing the latest from Iran or the potential of liquefied natural gas (LNG) or some other macro concern, today I'm just going to address one very common question I get from enthusiastic energy investors like you.
Remember, if you have a question or a comment of your own, be sure to register below and type your thoughts into the box. We'd love to hear from you.
Okay, who's up?
Q: I am starting out with such small amounts of money to invest. Is investing in the energy markets even worth my time and effort?óJohn B.
And here's why.
If you have money sitting in a checking account right now, it's earning nothing.
If your cash is in a savings account, you're making a little more than 1% annually on that money (if you're lucky).
So sure, your money is stagnant. You probably knew that. But it gets even worse. . .
See, the buying power of your cash is falling, even as I type this letter, due to consumer inflation.
So you can sit back and watch your hard-earned cash whittled away to nothing. . .
Or you can fight that assault on your wallet by investing in the most profitable sector of all time.
Last week, I talked about the Alerian MLP Index (NYSE:AMJ), which tracks the performance of the energy Master Limited Partner (MLP) sector. This electronic trading note (ETN) pays a current yield of 5% annually, and has appreciated by 100% in the last three years.
I showed you how a $10,000 investment back in March 2009 would be worth roughly $23,500 today.
But $10,000 is a lot of money for many investors. (It's certainly a lot for me.)
So, I did the math again, but this time starting with a more modest amount. And the results are still impressive.
If you had purchased 25 shares for $494 back in early 2009 and reinvested the dividends, your "small amount" would be worth $1,158.51 today.
That's a 134% gain.
On the other hand, if you'd have kept it parked "safely" in a bank account at 1.5% over three years, your $500 would be worth roughly $522.83 after three years.
And here's where it gets interesting.
That $522.83 today has the same buying power as $497 in 2009.
So, your money has gained nothing due to consumer inflation. And we're being a little generous with that interest rate.
So, is investing even a modest amount worth your time and effort?
But here's the thing.
You don't have to put a ton of time and effort into investing if you know where to look.
Kent has done a superb job in identifying equities and funds that offer the opportunity to turn any amount of money into big gains.
All you need is patience.
The energy sector is experiencing one of the greatest shifts in the history of investing. We've discussed in the previous question our timeline for natural gas. Just a few hundred bucks in the right companies today could be huge gains down the line.
Kent will be back on Friday. We're taking the day off for President's Day on Monday.
But next week, I'll be back to answer another question about energy investing, and explain when we can expect global demand to spike for natural gas. . .and the best way to profit.
James Baldwin, Money Morning