Oil is a very popular commodity that has been in the news recently for both its long term decline as well as the bounce it's seen in recent weeks. While trading the commodity directly involves buying the futures outright, there are still ways that the retail public can participate. Today we give you a few examples using ETF's The United States Oil Fund (NYSE: USO) is by far the most popular and direct way to play oil. It is an ETF that purchases the oil futures for you and holds them in a basket. Bullish investors in oil will buy into the basket at the price quoted at that time.
But what if you want some diversity and do not want to invest directly in oil but still participate in the upside. The Energy Select Sector SPDR ETF (NYSE: XLE) invests in oil companies as well as oil service companies. These companies benefit in the rise of oil and are almost perfectly correlated to the price of oil. There is stock risk here though. This means that one stock in the ETF could report bad earnings or a pending lawsuit that causes a large decline. In this case the ETF would underperform the price of oil.
Regardless of your choice they both represent easy ways to add oil to your portfolio.