If You Want To Be Rich, We Can Help You! | Natural Gas ETF vs. Natural Gas Mutual Funds

Today’s natural gas market offers investors many ways to trade this market. But how should you go about trading it? Should you invest in natural gas mutual funds or exchange traded funds?

Lets compare trading the natural gas ETF to trading natural gas mutual funds.

ETFs trade like stocks, that means you can buy and sell them during the trading day. If you are a day trader, this may be for you. Even if you are a longer-term investor, an ETF might be better. Since it trades like a stock, this allows you to enter stop orders, limit orders and market orders. If a news item comes out, you would be able to trade it immediately. You may also short ETF shares as you would a regular stock.

Mutual fund only allows you to trade at the net asset price at the end of the day. That’s it, take it or leave it. This leaves the investor in the dark as to what price he or she will buy or sell at.

Minimum amounts to invest.

Most mutual funds have a minimum amount you must initially invest in order to purchase the fund. This can range from several hundred dollars to $10,000 or more depending on the fund. Granted most brokerage firms will accept a lower minimum if the mutual fund is in an IRA.

ETFs have no minimum. You could buy just 1 share of an ETF if you wanted to. You will need to go to a low cost broker to do so. You wouldn’t want your investment dollars chewed up by high commission fees.

Options on ETFs

Many energy ETFs have options that you can trade. Instead of buying or selling an ETF you could trade puts and calls on it. This is a more advance strategy, but it does give you another tool in your invest toolbox. For example if you were long a gas ETF but thought the price might come down a bit, instead of selling the ETF, you could purchase a put against it or write a call against your position. These give you more ways to profit from your investment.

So there you have it. Natural gas ETFs or natural gas mutual funds? The best investment is the one that makes you happy while making you money. It could even come about as part of your stock options trading portfolio (for example). Do your research first before investing.

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