Dear Dr. R.V. Shrink:
My husband thinks he is Warren Buffet, but in reality he has a hard time deciding what to take at an “all you can eat” buffet. Since we retired and started living most of the year on the road, he has way too much time on his hands. He is always coming up with cockamamie ideas. Lately it is saving money on gas. Now that gas is low, he wants to invest in a gasoline option. He says that will lock him in at today’s price, so it won’t matter how high the price of gas goes, we will be pegged at this low point of entry. Should I just gas him and lock him in at this point. I am at wits end. I am so sick of hearing this mumbo jumbo. He has no clue exactly how this works. He has never invested in the commodities market. Should I make him go see an adviser? Help me quick.
--Fumed in Fremont
Dear Fumed:
There is a good amount of money made everyday in the commodities market. It all comes from the people that make bad judgments. Your husband has no business being in a risky trade he knows nothing about. It’s very risky for the pros. If he insists on trying to lock in a profit from the low oil prices of this minute, maybe he should consider something less volatile, like a blue chip oil major. Their stocks are down at this point. They often follow the price of oil. There is nothing to guarantee it won’t go lower, or be much higher by the time this publishes in a few days. Unlike a futures contract, you and your husband can hang on to a well-managed, dividend-paying stock. When the price of oil goes back up, they will benefit, the stock will most likely appreciate, you will receive a dividend and if you like, you can subtract any profit from your gas bill. If your stock goes south, at least you won’t be sitting by a pier somewhere, waiting to take delivery of 42,000 gallons of unleaded fuel your husband bought and refuses to sell at a loss.
Don’t send him to an adviser. Wall Street is littered with the burnt-out shells of people with advisers. Consider the fact that an adviser or managed fund charging 1.25% annually will cost you $125,000 over 10 years on a $500,000 portfolio @ 8% growth. You can buy a lot of expensive gas with that dough -- and your adviser is!
Yes, I guess you should just lock him up.
--Keep Smilin’, Dr. R.V. Shrink
2 comments:
It sounds as if he thinks this type investment is a guarantee of gas prices he will be paying at the pump. If so, he definitely has no business investing.
As one who has invested in commodities, the only realistic way of doing it is to buy contracts early, and then sell them before they mature. If you don't sell, you must take delivery of the physical goods, whether that be grains, metals, or in this case petroleum. This guy hasn't a clue as to what he would do with 42,000 gallons of gasoline if a tanker showed up at his house! Commodities must be understood before even thinking about investing in them, and this guy isn't even past the first page yet! You're right. Maybe she should lock him up...in a college!
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