Related topics: ETF, Exxon Mobil, emerging markets, Raytheon, energy
It's hard being an investor these days. Amid social upheaval in the Middle East, nuclear radiation in Japan and a U.N. offensive in Libya, there's plenty of bad news. Plus, the housing market remains dead in most of the United States and unemployment is stuck near a 30-year high.
Adhering to the famous quote that "the time to buy is when there's blood in the streets" is easier said than done. For starters, most folks have a conscience and are reluctant to profit off someone else's misery. If your investment philosophy is to cheerlead for world crisis and then become a profiteer, you have much bigger problems than your brokerage account. And for those of us simply looking for a silver lining to the current storm clouds hanging over the market, it is very hard to decide what is a calculated risk and what is a flat-out gamble.
But allow me to offer some suggestions. After all, the market's broad rally since September appears to be flagging and longer-term investors looking to safeguard their retirements may find the time is ripe to shake up their portfolios. And frankly, dangerous places -- including the Middle East, Japan and Libya -- may be as good as any in the current environment.
Let's take a look at each:
Top Mideast investment: the right energy play
In Yemen, after 33 years in power, President Ali Abdullah Saleh appears on the verge of resigning after weeks of demonstrations and defections by generals and government officials. In Bahrain, troops have been brought in from neighboring countries to fend off a rebellion. Egypt remains in turmoil just weeks after the uprising that led to the ouster of President Hosni Mubarak.
It is almost impossible to stay on top of the changes sweeping through the Middle East and North Africa, or to predict the political ramifications. The one constant is the upward pressure the upheaval is putting on oil prices.
That means investors looking to hedge against crude oil inflation or share in the profits for the energy sector should focus on the Energy Select Sector SPDR (XLE) or the stocks that represent the exchange-traded funds' top holdings, including Exxon Mobil (XOM, news) and Chevron (CVX, news).
Some investors have been enamored of investments like United States Oil (USO), an ETF designed to track the movements of light, sweet crude oil, or iPath S&P GSCI Crude Oil Index ETN (OIL, news), a fund that is pegged to West Texas Intermediate crude oil futures.
But don't be fooled. Whatever the marketing ploys, these investments do not faithfully track the movement of oil prices. The OIL fund recently was up 12% since Dec. 1, while USO had advanced by 13%. But light, sweet crude on the New York Mercantile Exchange was up 18% for the period. The ETFs just didn't keep up.
