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Investing in oil can be very profitable because some of the world’s largest companies are oil companies. There are different ways to invest in the oil industry, such as purchasing stock in public oil companies and participating in independent private projects. Individuals can also invest in oil exploration, refining, and service companies. They can make this investment in the form of mutual funds, commodities futures, or other derivatives.

Investors should determine the different levels of risk and reward inherent in each type of investment. The first step is to determine the investment objectives or goals because this may narrow down the prospective types of investments. Those seeking an annual return of seven to twelve percent can invest in stock of independent or major oil companies. Investors looking for 20 to 50 percent returns should buy stock in service companies that are expanding in new markets or in aggressive small independent companies.

One of the safest investments in oil is owning stock in the “majors,” or blue chip companies in the industry. This represents a good investment because the risk level is low, but that also means that return levels will be low. An individual who wants to make an investment in the oil industry without facing a lot of risk will consider this an ideal method to accomplish the intended purpose.

There is even an investment for those who want to throw caution to the wind in exchange for potential rates of return exceeding 100 percent. It comes in the form of a direct participation investment in an independent operating company. This is similar to how major companies invest with each other for developing projects.

Investing in oil can take many forms, from stocks to investing in projects under development. The ideal type of investment depends on the objectives of the individual and the amount of money to be invested. Making a smart investment will increase the chances of a potential profit.