With today’s financial markets as unpredictable as they are, an increasing number of savvy investors are turning to alternative investment strategies to diversify their portfolios and mitigate risk. According to Phoenix Capital Group, integrating energy investments into your plan can be especially beneficial.
While much of the national attention is on renewable energy, tried-and-true oil and gas consistently provide positive returns and growth potential. Incorporating alternative energy investments into your overall strategy can enhance the resilience of your portfolio and its growth potential.
Discover the benefits of energy investments below.
Low Correlation with Traditional Markets
It’s no secret that the stock market can be quite volatile. A look back at the time since the outbreak of the COVID-19 pandemic makes this clear. After the world came to a stop in early 2020, markets slowly but surely started to rebound, thanks in part to people returning to work and economic stimulus packages boosting the economy.
In 2021, the S&P 500 marked a record closing 70 different times, according to the Washington Post. It ended that year posting a gain of almost 27%, while the Dow Jones Industrial Average also increased nearly 19%. Then, in one fell swoop, it all came crashing down. January 2022 marked the worst month for stocks since the COVID outbreak in March 2020. Many investors who pumped money into the stock market at that time lost all of the money they gained over 2021 in just a month’s time.
Market fluctuations occur quite often, though not all of them are as dramatic. Investments in bond offerings that support business in the oil and gas sector are typically much less affected by these market fluctuations, making them a great hedge against market volatility and helping to stabilize your portfolio.
Essential Nature and Global Demand
Even as countries worldwide invest in renewable energy sources, the demand for oil and gas continues to be strong.
The International Energy Agency reported that the global oil demand is expected to be 1.1 million barrels per day in 2024 and 1.2 million barrels per day in 2025. These levels are in line with pre-COVID growth, again proving how essential oil and gas are for the world.
This essential nature ensures a steady demand, making energy investments more resilient to economic downturns.
High Yield Potential
Another major benefit of energy investments is that they typically offer higher returns than traditional investments. Phoenix Capital Group, for instance, provides bond offerings with annual yields that may range from 9% to 13% — significantly higher than average stock market returns. Adjusted for inflation, over the last 30 years, the average annual return of the S&P 500 is 7.78%. What’s more, that’s for the index as a whole. Unless you choose your individual stocks perfectly, it’s very possible to earn less than that or even lose money investing in stocks.
There are other differences between these bond offerings and stock market assets. Unlike stock market assets, bond investments provide little liquidity and are speculative investments to support a business in the oil and gas sector.
Diverse Investment Opportunities
There are various ways to invest in the energy sector, allowing you to gain diversification within this alternative investment class.
For example, you could invest in oil and gas projects, which gives you direct exposure to a part of the industry. You could invest in corporate bonds, providing you with a steady stream of cash flow. Or, you could invest in equities in energy companies, giving you a more “stock-like” angle.
The diversity in investment opportunities allows each investor to choose the option that best fits their risk tolerance and investment goals.
Enhance Your Alternative Investment Strategy
Creating a diverse portfolio is key to success for any investor. Integrating alternative investments in the energy industry, particularly in bond offerings that support business in the oil and gas sector, could be a game-changer for your portfolio. This sector may provide consistent returns with high yields due to its typical immunity from traditional market fluctuations and the continued demand for oil and gas worldwide.
Companies like Phoenix Capital Group offer high-quality investment opportunities in this field. They provide bond offerings that enable investors to tap into the potential of the energy market while enhancing their alternative investment strategies.
For more details on Phoenix Capital Group and its corporate bond offerings, visit phxcapitalgroup.com, or sign up for our next webinar to learn more.
