Diversification is the name of the game in 2009, as
investors look to spread their risk in a volatile stock market.
Data from The Share Centre shows strong demand for banking shares among its clients, accounting for more than one in five (22%) trades last week.
Meanwhile, Barclays Stockbrokers is reporting big investor appetite for oil, which traditionally has a low correlation with equities.
These two sets of information indicate that investors are looking to spread the risk across their
portfolio.
This claim is given further credence by the fact that one in eight (13%) investors identified diversification as their main reason for buying oil, according to Barclays.
Banking waters still choppy
Looking at the banking sector, Royal Bank of Scotland was both the most bought and sold share last week, with 43% of all investors that traded in banks last week targeting the giant.
Next on the list was Lloyds, accounting for 29% of banking trades, followed by Barclays at 25%, says The Share Centre investment adviser Graham Spooner.
"The banking sector continues to have a strong pull for investors, as many hope to make a profit from current share price volatility,” says Spooner.
While a number of investors have profited from the recent fight back by the banking giants, the sector remains too volatile for
cautious investors, who may want to wait for further evidence the banks are performing well before diving in.
Oil looking a good bet going forward
As for oil, the investment horizon is looking increasingly rosy. The commodity has surged from a low of $32 a barrel late last year to around $58 today.
And even though there have been minor falls in the last week as profit takers cashed in,
investors are confident that there are further gains to be had this year.
According to a Barclays Stockbrokers survey, almost two thirds (62%) of investors say they will invest in oil as they believe its price will rise.
“When it comes to commodities, oil remains one of the most sought after substances in the world,” says Barclays investment head Barbara-Ann King.
“It is intrinsically linked to the economies of both the developed and emerging markets and can be both an indicator for economic health and a driver of it.”
So, how do you buy oil?
There are a number of ways an
investor can get exposure to oil, the most obvious being to invest in a company within the oil and gas industry, such as Royal Dutch Shell or British Petroleum (BP), explains King.
“A more direct route to consider, however, would be using an Exchange Traded Commodity (ETC) focused on oil.”
