The “20% rule” states that an investor should have a minimum of 20% of their portfolio invested in alternatives like energy. This rule was made famous by the Yale endowment, which has outperformed traditional endowments made up of only stocks and bonds for the last 25+ years. In fact, an investor who invested using the 20% rule in 1995 would have earned about twice as much as an investor who used a more traditional allocation.¹
1. The information presented in this section and the above section represents the growth of a hypothetical $10,000 investment in the Yale Endowment (“Yale Endowment”) versus the same hypothetical investment made into an average endowment with at least $1 billion under management (“Traditional Endowments”). Return from 1996 and 1997 for “Traditional Endowments” represents endowments greater than $400 million. Individual investors may not invest in a university endowment - this information is for illustrative purposes only. Source: “Yale Endowment Model Thrives as Swensen, Proteges Post Top Gains” (Bloomberg).
A project is developed by an oil and gas operator who then seeks out investment capital to develop and exploit the opportunity.
The operator drills and completes the project and establishes production. The IRS allows the investor to deduct their share of these costs from their individual income.
The project will produce revenue over time. If the investor later sells the investment, they may also earn additional profits from the sale as a result of the ongoing and established production.
Unlike common stock, oil and gas investments can generate significant cash flow (income) from production. For investors in need of income from their portfolio, oil and gas investments can provide an attractive alternative to bonds, which also generate regular cash flow, but generally at much lower rates.
Like real estate, ownership of an oil well is a hard asset and provides intrinsic value. Oil and gas are also scarce resources with only so much on our planet. As the global population grows, demand for energy increases, while supply is limited by current production. This is why commodity prices have historically increased in value over time.
2. The information above is from macrotrends.net Read more
Although widely considered an attractive asset class, most direct oil and gas investments have traditionally only been available to the wealthy because of the large minimum investment requirements.
Congress passed the Tax Reform act in 1986 allowing investors to write off Intangible Drilling Costs (IDCs) as a way to incentivize the average American to invest in energy, but overall this tax advantage has been underutilized becuase little or no access and a lack of transparency.
U.S. Oil Properties changes all that. We combined the benefits of direct oil and gas investments with the efficiency and transparency of the Internet. The result is the revolutionary U.S. Oil Properties platform – the best choice for energy investments available directly to everyone online.