It’s hard to be an investor these days. Amid social upheaval in the Middle East and nuclear fallout in Japan and a U.N.-backed offensive in Lybia, there is a lot of bad news out there. Oh yeah, and let’s not forget that the housing market is still dead in most of the U.S. and unemployment is still at the highest level in about 30 years.
The famous quote that “the time to buy is when there’s blood in the streets” is much easier said than done. For starters, most folks have a conscience and are reluctant to profit off of 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 stormclouds hanging over the market these days, 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, these dangerous places – including, Japan, Libya, and the Middle East – may be as good a place as any in the current environment:
Top Middle East Investment – Energy Sector ETF
After 33 years in power, Yemen’s president hangs on to his position by a thread. Bahrain is calling in troops from neighbors to fend of a rebellion of its own. Egypt remains in turmoil after widespread protests that began weeks ago. It is almost impossible to stay on top of the protests sweeping through a wide array of Middle East nations, and even harder to predict where they may spring up next.
The one thing that is a constant, however, is the upward pressure Middle East unrest 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 ETF (NYSE: XLE), or its top holdings such as Exxon Mobil (NYSE: XOM) or Chevron Corp. (NYSE: CVX).
Some investors have been enamored with investments like the United States Oil Fund ETF (NYSE: USO) that is a commodity pool, or the iPath S&P GSCI Crude Oil ETF (NYSE: OIL) that is pegged to West Texas Intermediate crude oil futures. But don’t be fooled — whatever the marketing ploys, these investments do not track the ascent of oil faithfully. The OIL fund is up 12% since Dec. 1 and USO is up 13%. But light crude on the New York Mercantile Exchange is up 18% in that same period, from $88 to about $104 a barrel. The ETFs just didn’t keep up.
The energy SPDR, on the other hand, is up 20%. And while those other funds have gross expenses near 0.8%, the XLE fund costs just 0.25. Oh yeah, and the Energy Select Sector ETF also pays a small 1.3% dividend to boot.