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How to invest in natural gas in Ireland
A guide to buying, selling and investing in natural gas from Ireland.
Natural gas has been a reliable source of energy since the mid-19th century. Thanks to its availability and necessity, natural gas has become a mainstream commodity in the investment market.
There are plenty of ways to invest in natural gas from Ireland, and we’ve pulled together the main ones here.
1. Invest in natural gas ETFs
Exchange-traded funds are a way of investing your money in a wider selection of assets rather than trusting just a few firms.
Most ETFs are simple and accessible, and trading them works in a similar way to regular stocks. As well as being relatively straightforward, ETFs are also seen as less risky. By investing in a basket of assets, you insulate yourself to some of the daily fluctuations of the market.
If you are new to investing, then ETFs may be the best choice for you; natural gas is an incredibly popular commodity with a range of ETFs to choose from. Though there are no natural gas ETFs listed on Euronext Dublin, some of the most popular alternatives include:
- VelocityShares 3X Long Natural Gas (UGAZ)
- United States Natural Gas Fund (UNG)
- VelocityShares 3x InverseNatural Gas (DGAZ)
- Widespread access to the natural gas industry at a competitive price.
- Safer, less volatile choice for investors.
- Less control over your investment due to the diverse range of assets in an ETF.
2. Buy MLP stocks
Master limited partnerships (MLPs) offer tax advantages in that profits are only taxed when they are distributed to the general and limited partners of the company. Many MLPs are attractive to long-term investors because their business structure is designed in a way that requires them to return profits to investors quarterly through high dividend payments.
There are risks that come with MLPs, however, including variations in demand and fluctuations in prices due to new legislation, environmental accidents, or political and social shifts.
- Dividend payments offered can bring predictable returns on your investment.
- Easy to access through brokerage accounts and financial advisors.
- Stock prices may not be in line with commodity prices.
- Demand and market risk can have an impact on MLPs, and companies may choose to withdraw their dividends.
3. Buy shares in natural gas companies
Stocks are one of the more conventional ways to invest in a commodity. Being as popular as it is, there are multiple natural gas companies to choose from: ranging from Chevron to BP to Shell. Stocks can be easily bought through brokerage accounts and financial advisors but the decision on which shares to buy is entirely up to you.
Although purchasing stocks requires some knowledge of the market and its fluctuations, it is usually much safer than investing in futures, options or other volatile derivatives.
- One of the most conventional and accessible ways of entering the market.
- Wide variety of companies to choose from.
- Flexibility to exit the market at any time.
- Company’s stock price does not always correlate to the price of the commodity.
- As with all shares on the stock market, their value can go down as well as up.
4. Buy natural gas futures
Futures are a direct but more advanced and risky investment that’s subject to both the fluctuations of the market and the knowledge of the buyer. Since it is a high-risk, high-reward system, newcomers may want to gain some experience in the field before purchasing futures. To trade futures, you’ll need a brokerage account that supports futures, which not all mainstream brokerages do. Some options to consider in Ireland include Degiro and Interactive Brokers.
Futures, as the name suggests, are a way of buying natural gas directly at a later date and at an agreed-upon price. They’re a staple for big natural gas producers or utilities that buy vast amounts of natural gas, though seasoned investors and speculators can also trade them. Depending on market movements, you may end up making a solid return on your investment or just as easily losing money.
- Possibility of large returns on investment if you have good market knowledge.
- Direct way of owning natural gas.
- Unpredictable and constantly fluctuating market, with a high probability of losses.
- Possibility of futures expiring worthless if you don’t act on them within the specified period.
How much is natural gas worth now?
Is natural gas a safe investment in Ireland?
The world relies on natural gas for energy that’s cleaner than coal, and its abundance makes it quite a reliable commodity on the stock market. However, the market is never completely safe, and natural gas is no exception:
- Pipeline incidents: A risk for the environment as well as your profits, a burst pipeline can have disastrous effects on both your investments and the ecosystem at large.
- Dividend cuts: Gas companies often distribute dividends which allow investments to generate regular income. If a company cannot make enough money, however, dividends can be cut. This can lead to stock prices plummeting.
- Price volatility: Prices for natural gas have fluctuated violently over the years, usually as a result of shifts in supply. Gas is also seasonal, with people using more during the winter, which also affects prices.
There are several ways to invest in natural gas, including gas futures, shares, ETFs and MLPs. But keep an eye out for pipeline incidents and dividend cuts.
Not sure if natural gas is the right addition to your portfolio? Review your investment options across additional trading platforms and commodities.
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