By BRETT ARENDS
Be honest. When you are standing at the gas pump, refilling your car and watching the numbers spin higher and higher, don’t you wish you had some stock in Exxon or BP?
Of course you do.
Is it a good idea?
Let’s do the math.
Fuel prices are rocketing — again. Gasoline is up to $3.64 a gallon nationwide. It’s doubled in ten years and trebled in twenty.
You can blame Iran. You can blame China. You can blame quantitative easing.
But whoever you blame, the problem’s the same. Your costs are rising, but your income probably isn’t. Fuel prices have outpaced incomes for generations. Today the average worker earns enough each week to buy just 200 gallons of gas. Back in the late 1970s the figure was 300 gallons.
In the parlance of finance, you have a liability without a corresponding financial asset. A bad move. When prices rise, you either have to cut back on what you spend on fuel, or cut back elsewhere.
According to Labor Department data, gasoline makes up about 5% of consumer spending. In 2010, the most recent year for which we have data, the bill came to about $2,100.
Since then it has risen about 30%. By some crude math, that’s costing a typical household another $600 or so.
Michael Willis, chief executive of niche fund company The Willis Group, is among those who has been arguing for some time that we ought to invest where we spend. He calls it “consumption-based asset allocation.” (His firm even runs two small mutual funds, the Giant 5 Total Investment System (FIVEX) and the Giant 5 Total Index System (INDEX), based around the idea.) “If you buy it,” he says, “we really think you ought to own it.”
When it comes to energy, you can take matters into your own hands pretty easily.
Integrated oil companies are probably the easiest way for ordinary investors to play the energy sector. They are less volatile than smaller energy companies, or the companies which provide services, or lease deep-sea rigs.
The iShares S&P Global Index fund (IXC) is an exchange-traded fund, which owns foreign oil giants like Total, BP and Shell as well as the likes of Exxon and Chevron.
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