Q: I have a good friend who's 34, has a good job and is thinking of investing some money. He looked on the Internet and somehow found some company in Florida that he has been corresponding with that is encouraging him to invest in heating oil. They want a minimum investment of $3000.00 for so many gallons. My friend is considering this investment even though it is a lot of money. I told him it sounds pretty fishy to me. I wouldn't invest that much money in a company based in Florida (we live in Oklahoma) over the Internet. I told him if he really wants to do something like that he should learn more about it and find a financial advisor here who should be able to do the same thing. What do you think? — Al C., Oklahoma City
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A: Heating oil in Florida? Tell your friend to call me about investing in air conditioners in Alaska. Besides, sending $3,000 to someone you "met" over the Internet is not investing. It's more like buying meat from some guy on a street corner.
But if, by some chance, this company really is "legitimate," it sounds like they're pitching heating oil futures contracts. While perfectly legal, these contracts allow you to buy and sell large amounts of a commodity -- everything from coffee to pork bellies -- with relatively little money. If you know what you're doing, you can make big money on very small moves in the price of the commodity.
But these markets are very complex, dominated by professionals who trade them full-time, have access to research you don't and who've followed them for years. The companies that try to reel in novices like your friend are almost invariably looking for trading commissions and could care less whether you make any money.
And you're right about looking for a local expert: I can't think of a better place than Oklahoma to find someone who knows about oil.
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