What are Natural Gas ETFs?

0 Comments | Rating: 0 | |

Natural gas has become a very hot investment over the past 2 years. You have seen the wild gyrating swings in price over the past few years. You also have seen people calling for more natural gas exploration here in the United States as a way to get off our addiction to foreign crude oil. Natural gas has certainly been in the news.

Billionaire investor T. Boone Pickens has been all over the media with his Pickens Plan. He has a multi point plan on how we can use natural gas and has demonstrated the many benefits of using natural gas. He has brought a lot of attention to natural gas investing lately.

Now if a billionaire is getting excited about an investment, shouldn't you?

But if you want to trade natural gas, which is the best way to do it?

You can trade natural gas futures on the New York Mercantile Exchange or on the ICE exchange. But futures are risky and very volatile. You can try trading individual natural gas stocks, but which ones?

Perhaps the easiest way to trade natural gas is to use one of the various natural gas ETFs that are available.

A natural gas etf is an exchange-traded fund. ETFs have become a very popular way to trade stocks over the last few years. Exchange Traded Funds are similar to mutual funds. They are typically made up of a group of stocks, in this case companies with connections to natural gas. There are gas ETFs that invest solely in natural gas futures while other invest in companies that are natural gas producers. There are a wide range of natural gas ETFs to invest in.

As stated earlier, natural gas ETFs are similar to mutual funds. The primary difference is that when you trade a mutual fund you can only receive the net assets value of the fund at the end of the day. Its impossible to day trade a gas mutual fund.

A Natural Gas ETF will trade just like a stock. You can trade them through your current stockbroker. As opposed to mutual funds, you can trade the ETF through out the day. You can also market orders, stop loss orders and GTC (good until cancel) orders with ETFs. This gives you a clear advantage to trading a mutual fund.

Now that you have been exposed to this investment vehicle, its time for you to research it further.