Are You A Risk Taker?
From an investment standpoint, the oil industry is very risky. Inherently, oil is either in the ground or not. There’s certainly an amazing upside, but the downside is you could lose ALL your invested money.
Question is: Are you a risk taker?
Not everyone has the right mindset to be an investor in oil and gas wells. It’s certainly not for everyone. For example, let’s say you’re retired with a net worth between one and three million dollars and you put your money in conservative investment vehicles such as blue chip stocks, bonds, mutuals, IRA, real estate, and/or things that you can control. Your average Rate of Return (ROR) per year is less than 10% and you’re content. Although you have the money to invest, more than likely you’re not one that ventures out and takes risks. Therefore, investing directly into oil wells may not be for you.
But let’s look at an example of someone that fits the profile of an investor that is comfortable with risks. This person has at least a one to three million dollar net worth (and in some cases much greater) and is working and creating an active income. They are a diversified investor including movies, private placements, IPO’s, companies with a limited track record, investment vehicles they do not control, stocks, bonds, real estate and etc. This investor is looking to achieve no less than a 15% ROR annually, with ambition to achieve greater than 30% ROR. This makes this type of investor an opportunist, which is someone who dedicates a percentage of his or her portfolio for riskier investments that have opportunity to generate multiple Return on Investment (ROI).
There are many variables that could define which kind of investor you are. The two examples above are simply a for-instance. Ultimately, taking risks yields higher rewards as long as you’re willing to “roll the dice” after thorough due diligence.
Never invest with anyone that promises and/or guarantees you a return off the drilling of an oil well. Drilling oil wells have the inherent risk of being dry holes, which would result in you losing all your money.
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