What are the Different Types of Natural Gas Investments?

Jim B.
Jim B.
Investing in natural gas is becoming popular.
Investing in natural gas is becoming popular.

Natural gas investments can take place in any of the many, various industries with ties to the production of natural gas. Among the companies that are targeted by investors are natural gas producers, storage companies, and distributors. Investors may make investments in natural gas companies via stocks or mutual funds or can speculate on the price of natural gas via the futures market. Others may make natural gas investments directly into privately owned businesses by way of private equity in mid-market companies or venture capital in start-up companies.

The natural gas industry has been surging in accordance with the world's increasing search for clean, environmentally friendly energy sources. Recent deregulation in the industry has opened it up for investment opportunities in all parts of the process by which natural gas is converted into energy. This can range from the actual production of the gas itself to tangential companies like those that market natural gas as an excellent source of energy. For investors who wish to take part, there are many different types of natural gas investments that they may utilize.

Investors can put their capital directly into the natural gas industry by buying stock in companies within the industry. Those who wish to lessen the risk of losing money in a single stock can invest in natural gas–based mutual funds. Such funds pool their investments from multiple investors who share in the profits and losses of the securities within them. This allows investors in natural gas solid diversity in their portfolio.

Others may wish to speculate on the direction of the natural gas industry as a whole. For those investors, oil futures may be the right choice among all of the possible natural gas investments. The futures market is one in which investors buy and sell options to purchase commodities like natural gas at some point before the expiration date of their options. While risky, natural gas futures can be profitable to those who can predict the movement of natural gas prices and the timing of that movement.

Some investors may be seeking natural gas investments that put them in a more active role. Direct investment in privately owned natural gas companies seeking capital is one way to achieve this. For mid-market companies, the process is known as private equity, while start-up companies secure venture capital from investors. In both cases, the ideal result for the investor occurs when a company in which she invests take a bigger part of the market share in its specific part of the natural gas industry, making the investor's equity in the company worth much more than the initial investment.

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    • Investing in natural gas is becoming popular.
      By: Ingo Bartussek
      Investing in natural gas is becoming popular.