How Rising Oil and Gas Prices Might Affect Your Portfolio
Anyone who drives a car is keenly aware of the swift rise in the price of gas. This is largely a result of political uncertainty in the Middle East. What impact will the increase in oil and gas have on your portfolio?
The answer varies. In some cases, you’ll see a direct positive impact on your portfolio. Here are some examples:
Here are some examples of a direct negative impact on your portfolio:
Beyond such obvious positive and negative impacts, many companies (and perhaps the price of their shares) may see some change in an indirect way. Here are a few potential examples:
For mutual fund and ETF investors who don’t own the shares of single companies directly, this is a good time to review the holdings of each fund to determine if rising fuel costs will affect them positively or negatively. In doing this, investors should keep in mind that mutual funds are required to report their holdings only at set intervals over the course of a year, so the information could be a bit dated, depending on the fund’s turnover of holdings.
Higher gas and oil prices could also have a negative impact on fixed-income investors. Higher fuel and energy prices have an inflationary impact upon the economy, both directly and indirectly, as discussed above. Higher inflation is the enemy of bond holders, in that it decreases the purchasing power of the fixed-interest payments they receive over the life of the bond. This is also the case for holders of bond funds and ETFs.
This article scratches the surface of how higher gas and oil prices could affect investors. Please add your thoughts in the comment section.
Roger Wohlner, CFP® is a fee-only financial advisor at Asset Strategy Consultants. Roger provides advice to individual clients, retirement plan sponsors and participants, foundations, and endowments.
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