From a consumer perspective, one of the biggest stories from the latter parts of 2014 and early parts of 2015 is the drop in gasoline prices. While this seems to suggest that making investments now in the oil or natural gas industries would be poorly timed, in fact the current state of the market might actually indicate that this is precisely the time to start investigating further.
Low Prices for Some Assets. The sharp decline in oil and gas prices has resulted in what may be a good buying opportunity for related investments. You may wish to consider not only stock in publicly traded oil and gas exploration companies, but also private investments as well.
Having a self-directed IRA with a company such as Quest Trust Company gives you the opportunity to use your retirement funds to make these types of investments. Because the laws relating to the exploration and development of natural resources are sometimes arcane and complicated, these investments can take many different forms – forms that may not be familiar to even relatively experienced investors.
Seek Professional Assistance. If you don’t have familiarity investing in oil and gas companies, particularly private investments, you may wish to seek professional assistance before committing any funds from your self-directed IRA. Certain types of investments in the industry may carry additional tax benefits – benefits that would be lost or redundant if done within a retirement account. You may wish to leave these investments to your taxable accounts, and use your self-directed IRA for those oil and gas investments that would otherwise generate a significant tax bill (and which you’d therefore avoid by having the investment in a tax-advantaged account).
Local Legislation and Politics. One way to come up with new investment opportunities in the oil and gas industry is to pay attention to your local legislative and political scene. Hydraulic fracturing (or “fracking”) has become a hot button issue in many jurisdictions, for example, so the direction that your city, county, or state takes with respect to allowing fracking – and under what circumstances or regulatory restrictions – could significantly change the investing landscape.
Volatile Markets Create Opportunities. The recent price volatility for oil and gasoline has demonstrated that even as consumer demand remains relatively steady, the underlying commodity markets themselves often move in unexpected and sometimes hard to explain ways. However, generally speaking, volatile markets create more investment opportunities. Remember that for practically every bullish investment opportunity there is someone on the other side of the coin willing to take a bearish position.
Your self-directed IRA can be a great opportunity for you to invest in assets and investment types that you’d never be able to make with your 401(k) at work or a traditional IRA. Now just might be a great time to take a closer look at oil and gas investments.