BOSTON - think positive. The pain you feel at the pump for $4 per gallon gas can become a little easier to bear once you receive your next quarterly statement of the mutual funds.
Chances are your fund portfolio is the holder of the names of oil that have been reported profits size Texas this week and stimulate the dividends to their investors. Exxon Mobil, for example, is the largest component in the Standard & Poor 500, the most widely followed by reference between index funds anchor of numerous plans of retirement accounts and 401.
Exxon won $ 11 billion in the first quarter, its largest income in more than two years. Exxon and Chevron rival increase their quarterly dividends, stimulate yields for investors. Combined, Exxon and Chevron compose approximately 4.6% of the & S P 500.
If your portfolio includes a specialized fund focusing on energy stocks, you have even more reason to consider the right side of the increase in the price of oil. Energy stock funds returned an average of 26 per cent in the past 12 months, the performance of third best among 21 categories of national funds of Morningstar. That at the top of return of the S & P 500 almost 17%.
Is the top performer among all Fund is a Fund of energy. Workplace integrity Williston basin Stock of North America (ICPAX) returned to 63%, with sizzling gains of the exploration of the energy and oilfield services companies that it promotes.
MAINTAINING THE BALANCE
These frightening numbers make these tempting funds. But be careful if you are considering a specialized fund whose returns are closely linked to fluctuations in energy prices.
"The initial knee-jerk reaction to jump in could not be justified, because most investors already have lots of exposure to energy, in their portfolios" said Rob Wherry, an analyst with Morningstar following the energy funds. "It is important to check what you have in your wallet first."
Energy stocks represent about 15 per cent of farms followed funds la S & P 500, it is a good threshold to assess the exposure of your portfolio energy bon
Still 15 percent may be too high for some investors to take risks. It is not just energy stocks that leave an investor exposure to fluctuations in energy prices. Price changes can also make or break the bottom lines of other companies, including airlines and makers of petrochemical products.
Also, take custody throughout recently hot market area, because the strong gains often before a crash. Witness what happened in 2008. Oil reached a record of $147 per barrel in the summer, and then dropped below $40 winter as the economic news was compounded et thirst for the planet of tail offshore oil. Energy funds lost an average 51 percent this year, compared to the loss of the S & P 500 37%.
THEY CAN PRICE LAST?
As for the most recent wave of oil company, two high energy fund managers don't expect a repeat of 2008. They are cautious, because it is difficult to predict if the war in Libya and Mideast political instability will continue to generate enough uncertainty about oil supply to support prices.
But they expect cheap oil and cheap gas disappear soon, based on the fundamentals of supply and demand.
"Oil is finite in quantity, and once you get a barrel of the Earth, it disappeared forever, says Bob Walstad, co-manager of the of inventory Integrity Williston Basin/Mid in North America, the Fund, which beat all the others over the past 12 months.".
In rising demand for oil, the world production was pushed for decades, Walstad, explains: "we have years of drilling just to catch up.".
Walstad co-manages Fund 319 million of Minot, n.d., at the heart of the Williston basin. The region, which stretches across the Dakota and Montana and in the South of the Canada, is experiencing a boom in the exploration and the production of oil extracted from shale deposits. The Walstad funds has changed its mission to name et of investment in 2008 to capitalise on the boom.
Many of the favorite stocks funds are oilfield services companies: Top holding Baker Hughes is 52 per cent in the past 12 months and no. 3 bearing Lufkin Industries has more than doubled.
Dan Rice, co-manager of BlackRock energy & Resources (SSGRX), said that the strengthening of the global economy made him confident that energy stocks will continue to benefit in high yields.
"I think that I can make returns of 20-30% for a number of years," rice said of its $ 2 billion Fund, one of the two choices of Morningstar analyst in the category of energy stock funds.
The Fund is 31 per cent in the past 12 months. Long-term investors have experienced an average of 18.4% annualized return more than 10 years. Which place in the top 4 percent of its class during this period.
Rice currently promotes stocks of coal and natural gas, such as Massey, a minor who is current top of the holding fund. He says that these strong recent gains for oil stocks have created fewer opportunities to find good business than in other segments of the energy industry.
Investors expected that probable oil prices cannot remain above US $100 a barrel much longer, so that of the reflected in the price of oil big stocks. Rice said oil could remain above $100, another six months or more. But he figures prices are likely to return to approximately $90 on long-haul, assuming that the global economy continues to grow at 2 to 3% per year.
VOLATILITY AHEAD
Again, rice is optimistic on energy stocks. This is why it is now more than 75% of its portfolio in small - to medium-sized businesses, rather than Exxon or Chevron. Smaller stocks are more likely to publish more strong gains in the increase in the market that the large countries and rice has positioned his capitalise Fund ranging from small.
However, it recognizes that invites approach more risk many investors may be willing to take. When stocks decline, the smaller names can not more difficult than the greatest probable.
"Because volatility is so high, it is really not appropriate for many people," says rice. "You must have a stomach strong."
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