Why Investments in Oil and Energy Should Be Considered

Clearly, the risk that certain people place on their financial savings isn’t a good one. For many investors in the U.S., the likelihood of this risk is high. This could have a high impact on investors too. However, at the end of 2006, 75{77320433bc1b8ebb371c6b1a29cf94b11e4bdcd22553acf623dced07e2a2b3ad} of American investors’ financial investments did not involve any capital risk (investments in savings accounts and life insurance). From the point of view of the protection of the investor, these additional details could appear reassuring. But, this is not the case.

On the one hand, this shows an insufficient diversification of investments. Whatever the current situation, this allocation causes investors to lose returns when they save for the long term, such as preparing for retirement. On the other hand, this situation is explained, to a large extent, by a strong aversion of the households concerning risks and their subsequent losses. But, fear of danger is not always good counselor.

On the contrary, this leads many investors to behave against the conditions of the markets with regard to risky financial investments. This is shown by the evolution of investments in recent years. After the 2001 market debacle, investors “came back” rather late to the stock market. They tended to buy shares or invest in risky collective stocks when stocks were already at relatively high levels. They would also be penalized by reverse behavior. Investors rather invest late and take risks rather than invest on things that provide mediocre profits.

Another risk identified is “under-marketing of certain products”. This is the risk that products sold to investors are not tailored to the needs of those who buy them. The government considers the probability that this risk will be lower than the previous one but its possible cost would be quite high. Given the increasing complexity of some savings products, investors can misunderstand the risk/return ratio, especially if the sales promotion is not systematically accompanied by advice tailored to the client’s needs.

A third risk, also due to the complexity of the products, is that of a “tax surcharge” linked to an insufficient transparency of costs. According to experts, its probability is lower but the cost to the investor can be significant. This is why it is important to speak with an investor before making any rash decisions.