The content of this post diverges from my usual Lake George related material and describes a method by which the average American can offset rising prices in gas, heat, food, clothing, etc. As the owner of a business which consumes copious amounts of oil and relies on gasoline to fuel the cars that bring guests to our hotel, I spend a lot of time
During the last decade, the use of exchange traded funds (ETFs if you want to sound cool) have become all the rage. An ETF is a fancy term for a stock which
What does this have to do with $5 gas? Let's say that you believe that the price of a gallon of gasoline will increase to $5 (*vomit*). Furthermore, let's assume that you will drive 2,500 miles this summer. Assuming that your car averages 25 miles per gallon of gas, you will consume 100 gallons of gas. If gas prices increase to $5 per gallon from today's $3.73 national average, then your costs will increase by $127 this summer (100 gallons X $1.27 per gallon increase in price). Bottom Line: You will spend $127 more and get nothing extra for your money.
Now to the good news. Remember the ETFs (the stocks that allow you to
There is a risk of loss involved with this process. If you are wrong, and the price of gas decreases, the ETF will lose value and you take a loss. No one wants losses but the loss that you take on the sale of the ETF is partially offset by the fact that you pay less at the pump (remember that a decrease in the price of gas triggered the decrease in the value of the ETF). Moreover, losses incurred while trading ETFs are usually tax deductible while price increases in gas are not.
I realize that this post has
Disclaimer: There are risks involved with investing in ETFs and any financial instruments. Nothing in this post should be construed as advice to invest in a particular financial instrument. As of the time of writing, I do not have any positions in the ETFs mentioned above but I am considering taking a long position in the gasoline and heating oil ETFs.