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Lee McGowan
Lee's Mutual Funds Blog

By Lee McGowan, About.com Guide to Mutual Funds

Got Oil?

Friday June 5, 2009

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.

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