Got Oil?

The stock market has been volatile, but let’s talk oil. In a span of five months in 2008, the price of oil went from $150 per barrel to under $40 per barrel. The price of oil hit $70 last week. Talk about swings in the market.

With oil on the rise (perhaps I should use past tense?) does it mean it’s time to buy a sector fund with exposure to oil? I mention “time” very carefully. It’s always difficult to time the market; I haven’t seen anyone time the market consistently. If you’re compelled to jump in and try to gain from a potential future run-up in oil prices, the first step is to review your current exposure to energy.

An investor with a diversified mix of funds, more than likely, has a healthy exposure to energy. For example, as of May 29, 2009, 13.03% of the S&P 500 is weighted in energy. The moral of the story is to check the exposure of your funds prior to jumping into a sector fund.