Oil prices have been plunging, you may already have benefited from the cheaper cost of filling up your car, but could it prove a little more problematic for your investments?
Companies involved in oil and gas exploration make up 17% of the FTSE 100 and 14% of the FTSE All Share.
Specialist commodity funds and energy resources funds that invest in oil companies and associated industries have been hardest hit.
Why has the price fallen?
China, one of the world’s economic superpowers is not growing as fast as it was. This means its industry and factories don’t need to order as much.
The U.S. is not buying as much from other countries because of domestic investment in fracking. By drilling into the earth to release shale gas and oil, its need to import billions of barrels from elsewhere has diminished.
Russia is dependent on exporting oil. When the price falls, Russia gets hurt, but behind closed doors, other nations are willing to make Russia suffer as there is a belief this will give the West political leverage when it comes to negotiating with the Kremlin over its controversial military action in Ukraine.
The age old investment rule still applies:
Diversify, Diversify, Diversify
A successful investment portfolio invests in a broad spread of assets to take advantage and soften the blows of market volatility.
If you would like to review your investment strategy you can contact us to arrange an appointment with one of our independent financial advisers.