This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Mutual Funds for High Oil Prices

NEW YORK (TheStreet) -- With oil prices climbing, you might expect that investors would be racing to buy funds that have big stakes in energy and commodities.

But in the past year, shareholders have followed unexpected patterns, investing in some energy-oriented funds and pulling out of others.

According to Morningstar, investors have put $6.1 billion into commodities broad basket mutual funds, which have 47% of their assets in energy.

At the same time, shareholders have pulled $600 million out of natural resources mutual funds, which have 44% of assets in energy.

Why are natural resources funds unloved? Part of the problem is that the resource funds invest in stocks of energy and commodity producers.

Portfolios hold big integrated oil companies such as Chevron (CVX) as well as gold miners such as Randgold Resources (GOLD).

These days many retail investors have soured on equities, pulling money out of most kinds of stock funds. Even though energy companies stand to generate huge profits if oil prices spike, fund shareholders are not interested.

10 Dow Dogs That Are Barking for Gains

Many nervous shareholders prefer the broad basket commodities funds. Instead of holding stocks, the funds invest in futures and other derivatives that track benchmarks such as the S&P GSCI commodity index.

There is a clear case for owning a broad basket fund. If commodity prices skyrocket, the funds could climb and help diversify portfolios. But investors should not overlook natural resources funds.

Because the two kinds of funds don't always track each other, it can pay to hold both a natural resources fund and a broad basket portfolio.

Recently the performance records of the different categories have diverged.

During the past five years, natural resources funds have returned 4.1% annually, while broad basket funds have lost 1.3%.

Seeing that record, some investors might decide to only hold a fund that owns natural resources stocks. But keep in mind that natural resources funds tend to be volatile, soaring in bull markets and falling sharply in downturns.

What Buffett Knows About Bank Investing That You Don't

To appreciate how the records of the funds can differ, compare the performance of Prudential Jennison Natural Resources (PGNAX), one of the largest funds in its category, and Credit Suisse Commodity Return Strategy (CRSOX), a popular broad basket fund.

1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
SYM TRADE IT LAST %CHG
AAPL $132.54 0.88%
FB $80.54 0.07%
GOOG $540.11 -0.44%
TSLA $247.73 0.86%
YHOO $43.48 -0.44%

Markets

DOW 18,232.02 -53.72 -0.29%
S&P 500 2,126.06 -4.76 -0.22%
NASDAQ 5,089.3620 -1.4320 -0.03%

Partners Compare Online Brokers

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs