Hey Guys, Ben Here and WELCOME to Motivation 2 Invest. Our Mission is to Motivate you to INVEST for your financial freedom by providing you with valuable investing tips & strategies.
Due to the recent global crisis Travel restriction’s have been put in place which has led to Flights been cancelled, planes being grounded & thus the AIRLINE STOCKS have TAKEN A REAL HAMMERING!!!!
WATCH THE FULL YOUTUBE VIDEO BELOW!
Is the Airline Industry doomed?
Or WILL THE AIRLINE INDUSTRY TAKE OFF AGAIN & reward those brave investors which decided to hop on board!?
IN this video, we are going to find out by exploring my favourite AIRLINE ETF or Exchange trading fund & whether you should invest into the volatile airline industry!
LETS DIVE IN!!!!
WHAT IS AN ETF?
AN ETF is an exchange traded fund which is basically a basket of stocks that tracks a particular segement of the market.
Investing into a fund such as this can be a great way to diversify your investment across multiple companies in an industry extremely easily!!
They also are one of the lowest cost forms of investment both in terms of taxes & investing fees.
Now in other industries there are many different ETF’s which you can use however, the unique thing about airlines is they have just one ETF which is purely focused on AIRLINES.
US GLOBAL JETS ETF (JETS)
THIS IS THE US GLOBAL JETS ETF (JETS) which includes the Major US airlines such as American Airlines (AAL), Delta Air Lines (DAL) and Southwest Airlines (LUV).
The fund also has some exposure to other companies in the aviation industry such as aircraft manufactures & airports. With a small portion in international companies.
Despite the JETS ETF being a Multi cap fund, it is weighted strongly towards large market cap airlines.
THE FUND was DOWN by over 50% in the first quarter of 2020. With many VALUE INVESTORS HOPING ON A AIRLINE RECOVERY & THUS LARGE REWARDS!!!
FINAL THOUGHTS?
These airlines are facing major issues, with many burning up to $100 million dollars per day to stay afloat!!
Warren Buffett also stated the airlines will need to borrow at least
“$10 or $12 billion each,” and required to be paid back out of earnings over some period of time.” Which is not a good sign for shareholders.
However, on the upside will we always need to fly & I believe travel demand will return at some point.
How this will look exactly is yet to be seen.
I personally have a very small stake in both DELTA airlines & southwest airlines as they are best placed to whether this storm!
HOWEVER, It is a very risky investment & that’s why I only have a very small amount of my portfolio in those two airlines.
Now remember this is not financial advice, so please assess your own investing goals & risk tolerance don’t invest anything which you can’t afford to lose!
SO DO YOU THINK the AIRLINE Industry will take off again & COULD BE A GREAT TURNAROUND INVESTMENT?
The Recent global crisis has caused a mass number of travel restrictions to be implemented & lockdown of the entire planet.
Thus, demand for oil has dropped and thus the price of oil has PLUMMETED!
The price of Oil even wen’t negative which caused some people to panic & other people to even think they could get paid to have their cars filled up!!! (Grahma Stephan style – tone)
Of course this was not the course this was not the case.
Why did oil prices go negative?
The oil prices only wen’t negative due to expired Futures contracts. As previously before the global lockdown. Investors would purchase oil commodity stocks at a pre defined future price & then make money if it was higher.
However, in this environment these type of contracts just aren’t feasible.
HOW can you take advantage of this opportunity?
Well if you believe that the lockdown will eventually be lifted and the economy will recover from this recession as it has done so many times previously. (Pexels video traffic)
Then now could be a great time to invest in oil.
So in this video I’m going to talk you through my top 3 oil Energy ETF Funds.
Which offers you direct exposure to the oil industry. I’m also going to explain how I’ve invested during this oil crisis!!
WHAT determines the price of oil?
The price of oil is determined by three major factors, SUPPLY, DEMAND and COST to Drill.
With the Demand at an all time low & excessive oil supply the price has plummeted.
This is also not been helped United States which has risen RECENTLY TO become the NUMBER ONE oil–producing country in the world,
producing nearly 18 million barrels per day!!
Then of course you have Russia and Saudi Arabia to add into the mix who decided to have a “Who could go cheaper?” price war which didn’t help the oil prices at all!
Then of course you have the “Cost to drill” which varies massively between projects & countries with the US having some of the highest drilling costs & the Saudi Arabia having some of the cheapest!!
Many smaller US oil companies were jumping on the OIL RUSH bandwagon using lots of debt to fund their operations when oil prices were higher & thus when oil prices dropped they were left in a very RISKY & VOLATILE SITUATION.
As their profit margins no longer worked & it doesn’t pay to drill for them!!!
(Now I did a Full video Analysing the Oil Industry in more detail, So I won’t go into too much here) (You can check that video out on youtube)
Long story short, many investors are seeing this smaller oil companies which are over leveraged as very risky & I completely agree & will be staying away from Smaller companies.
WHAT ABOUT OIL ETF’s?
Oil and gas ETF’s or exchange-traded funds offer investors more direct and easier access to the often very volatile energy market.
While there is the potential for MASSIVE returns by investing in the oil and gas sector, the risks can be very high!!
Oil and gas ETFs offer you the ability to invest in a diversified portfolio of energy companies. They are basically a basket of selected energy stocks.
There is currently around 21 different oil & gas funds, but here are my top 3.
XLE is the most historic, least expensive, and the one of the largest ETFs by a long shot.
XLE owns entirely US Oil Companies with a large weighting toward large market cap businesses.
Investing into this Oil ETF will give you access to EXXON MOBIL, CHEVRON and CONOCO PHILIPS (COP).
These are all GIGANTIC & WELL INTEGRATED OIL & GAS COMPANIES WHICH I WOULD SAY ARE THE SAFEST INVESTMENTS IN THE OIL INDUSTRY DURING THIS VOLTAILE TIME!
Coming in at number 1 is GLOBAL X MLP & ENERGY INFRASTRUCTURE ETF or MLPX.
This fund was the best Oil & Gas fund for Q2 of 2020 by it’s one year performance.
The MLPX follows the Solactive MLP & Energy Infrastructure Index
Thus this fund offers a basket of multi cap MLP funds (Master limited partnerships_
(Which are businesses with a company structure of MASTER LIMITED PARTNERSHIPS.
Thus this fund has a large concentration of Midstream Oil & GAS COMPANIES.
Mid stream companies are those which are involved in the processing, storage, transportation & marketing of oil & gas.
The MLPX fund’s top holdings are
an oil and gas pipeline companies such as:
TC Energy Corp. (TRP) & Enbridge Inc. (ENB),
In addition, to firms such as Williams Companies (WMB), an integrated energy firm.
Performance over 1 year: -41.0%
Expense Ratio: 0.45%
Annual Dividend Yield: 10.10%
3-Month Average Daily Volume: 1,576,144
Assets Under Management: $506.0 million
Inception Date: August 6, 2013
Issuer: Global X
HOW HAVE I INVESTED INTO THE OIL INDUSTRY?
Although the ETF’s offer a great way to diversify your portfolio when investing into the oil industry. I decided to invest in just a few of the LARGEST, MOST WELL INTEGRATED & most importantly those with a HEALTHY BALANCE SHEET & MINIMAL DEBT.
Thus I invested into ROYAL Dutch Shell & BP which both had a fantastic Valuation.
I personally don’t have more than 5% of my portfolio in oil stocks.
As the Oil industry can be extremely volatile & risky so ensure you understand your own risk tolerance & your own investing goals.
Now remember this is not financial advice, so please do your own research prior to investing into any stock we mention on this channel.
Having said that my oil stocks are currently oil up by around £2000 in just a few weeks which is a good sign!
For my full analysis of the global Oil industry & the stocks I’ve invested check out the link below.
I’ve had a number of requests asking Ben, What is the best investment strategy for beginners??
So in this video I’m going to reveal my top 5 Index Funds and WHY investing in those can be the greatest investment strategy for you guys!!
LETS dive in!
What are Index funds?
An Index fund is basically a basket of stocks which tracks a particular INDEX or segment of the stock market.
For example, the S&P 500 is an index which tracks the top 500 largest market cap companies in the USA.
What are the benefits of Index Fund investing?
Index funds are one of the greatest ways to invest in the stock market as they are EASY, PASSIVE, LOW COST and OFFER INSTANT DIVERISFICATION to a wide range of companies with one single investment!
They are also average a consistent great performance, for example the S&P 500 has returned an approximate 10% return over the past 90 years.
Despite all the multiple dips and stock market crashes through this time!
From the Great Depression in the 1930’s to the dot com bubble in the early 2000’s and even the financial crisis in 2008.
INDEX FUNDS vs Actively Managed Funds?
Actively Managed funds are those funds where you pay a fee for your investment broker to invest & rebalance your portfolio regularly.
Although this may seem like a great option to improve your stock market returns. The Majority of these Actively Managed Funds actually don’t beat the stock market and thus INDEX FUNDS!
These actively managed funds take approximately 0.75% per year, so if you have $10,000 or £10,000 invested if your in the UK they will take approximately £75 or dollars per year.
It may not seem a lot at first but these fees compound with time.
Also as they take 0.75% of your whole PORTFOLIO amount this actually works out at 7.5% of your earnings per year!! Which is a lot!
Compared to index funds, these have an average expense ratio of just 0.08% per year, which is approximately 10 times cheaper!!
Now I’ve explained to you the benefits of index fund investing lets dive into my TOP 5 INDEX FUNDS!
5. Vanguard S&P 500 ETF (VOO)
First on my list is one of my favorite index funds which is the Vanguard S&P 500 ETF (VOO)
(Talk through it’s 52 week low and high, expense ratio, year to date returns, DIVIDEND YIELD and WITH AN EXPENSE RATIO of Just 0.03% this is one of the lowest cost S&P 500 index funds.
You can see that the fund has made profits during most the years, shown by the green bars. With only 2018 and 2020 currently down.
The year of 2019 achieving over a 30% return that year!
LOOKING at the sector weightings we can see it’s heavily focused in the consumer cyclicals.
It’s top 10 holdings include the Large tech giants such as Microsoft, Facebook, Amazon and Alphabet the Parent company of google in addition to BERKSHIRE HATHAWAY Warrens buffets incredibly successful investment firm!
Coincidentally Warren Buffett personally recommended this fund due to it’s great performance and extremely low expense ratio of just 0.03% for example,
For every $10,000 it costs you just $3 in fees. This makes it an ideally fund to hold for the long term.
4. SPDF S&P 500 ETF (SPY)
The Next fund on my list is the SPDF S&P 500 ETF (SPY).
SPY is a heavily traded ETF it was formed back in 1993 as the first public ally listed ETF if the USA.
The main difference between this and the previously mentioned funds is that it tracks the S&P 500 in REAL TIME!
However, for this increased Accuracy you do pay a slightly higher expense ratio of 0.09%.
3. SCHWAB US DIVIDEND ETF (SCHD)
Next on my list is the SCHWAB US DIVDEND ETF (SCHD), this is the ideal index fund if you’re an investor who wants that passive DIVIDEND INCOME which comes from reliable dividend stocks.
With this type of index fund, you can choose to have the dividends paid directly into your bank account or reinvest them for more growth.
This index funds tracks the DOW JONES US DIVIDEND 100 INDEX. Which is a collection of the 100 of the most reliable and best paying dividend stocks in the US Stock market.
(Go through details, on yahoo finance)
2. Vanguard FTSE 100 ETF
Next on my LIST is the Vanguard FTSE 100 ETF, this tracks the U.K FTSE 100 which is the top 100 largest companies in the U.K.
This fund is great because it offers you exposure to the U.K stock market and is massively undervalued compared to the S&P 500 index funds.
(CAPE ratio)
I did a full video analyzing the FTSE 100 INDEX so check that out on the link below.
1. VANGUARD LIFE STRATEGY FUNDS
Next on my list is the VANGUARD LIFE STRATEGY which compile together a selection of the INDEX funds mentioned previously to give you one SUPER INDEX FUND which is diversified INTERNATIONALLY.
This is great for beginner and very long term investors.
They come in a variety of options dependent upon your risk tolerance,
From the VANGUARD LIFE STRATEGY 20% equity fund which has just 20% in stocks and the rest in safe and reliable bonds. TO the Vanguard 50% and of course the Vanguard 100% equity fund which contains 100% stocks, which of course means higher returns but also higher volatility.
This 100% equity fund has arguably one the lowest on going charges I’ve ever seen just 0.22%…Which is incredible low!
Disadvantages?
Some disadvantages of this portfolio include the in ability to customize the portfolio and thus rebalance your portfolio to buy more or less in certain markets.
The fund also has a large weighting towards LARGE MARKET CAP STOCKS which is great for stability but history has suggested that MID CAP STOCKS USUALLY OUTPERFORM THESE DUE TO THE HIGH GROWTH POTENTIAL!
I will be doing a full video on the various Life strategy funds soon so be sure to check that out.
FINAL THOUGHTS?
Overall, whichever investing strategy you use depends upon your budget, risk tolerance and investing goals.
However, I do believe that every portfolio can benefit from some investment into INDEX FUNDS.
As an example, I’m more of a higher growth investor thus I have a large portion of my portfolio in individual stocks.
My portfolio is currently 50% INDEX FUNDS and 50% Stocks.
However, my stock selection is split between over 30 stocks which is well diversified.
I plan to re balance my portfolio in the future to 60% INDEX FUNDS and 40% in less than 10 REALLY EXCEPTIONAL STOCKS.
