Oil and gas investing is a very highly speculative field of
sector investing. It is almost like gambling. You are entitled with
very high potential return but at the same time you have to face very high
risk.
If your oil and gas investing opportunity turns out to be a
successful one, you may end up with an investment returning hundreds
of percent.
For example, an oil and gas drilling company, with its
current assets, is worth at around ten million dollars. All of the
sudden, one of its drilling effort turns out to be successful. The
amount of oil from this drilling amounts to 100 million barrels worth at a
market price of $10 dollars per barrel.
Now, this little ten million dollar oil and gas drilling
firm is worth at least $1 billion dollars.
Your oil and gas investing opportunity will almost certainly
soar by more than 100 fold.
Sounds exciting, doesn't it. Well, the chance of this
happening is probably 10000-1. And if you're wrong, your oil and gas
investing position will likely lose significantly within a short period of
time.
Therefore, the portion of portfolio that is dedicated to oil
and gas investing should be very small. Hopefully, it is less than 1%.
Again, oil and gas investing is an area of investment that requires extensive
background.
