The oil market took a nosedive recently. As a result, the United States Oil Fund, LP (NYSEMKT:USO) dropped significantly. This has had a major impact on retail investors. If you were sold USO by your broker and have suffered losses in your account as a result, you may be able to recover your losses in a FINRA Arbitration. The Investment Recovery Team at Halling & Cayo represents investors all over the country and only charges a fee if we recover money for you.
USO, an exchange-traded fund (ETF) that tracks the futures markets to give investors direct exposure to oil prices, tried to mitigate some of the market backlash by investing more beyond the front-month contracts and rolling to the next month’s contract two weeks before expiration and instead spreading the contracts to June, July and August. These changes come as the COVID-19 pandemic sweeps the globe.
Many retail investors have put their faith in USO in recent months and are new to the fund because of the lower than average prices. But, as John Davi (founder and CIO of Astoria Portfolio Advisor) said in a CNBC interview, people often invest in oil futures with anticipation that crude will go up, however they aren’t fully aware of the complicated aspects of that market.
Experts predict that this may not be the lowest the market will go and USO might not be the best investment at the moment while the volatility of the market is so high.
However, depending upon your individual risk tolerance and investment objectives, it may be acceptable for your investment advisor to purchase oil and gas stocks as part of your portfolio. With that said, your investment advisor must ensure that your investment portfolio is sufficiently diverse to avoid taking on significant losses and must not over-concentrate your portfolio in a certain industry. Investments within the same industry, geographic region or security type tend to be highly correlated, meaning that what happens to one investment is likely to happen to the others. It is easy to see why a Customer may experience massive losses when there is a downturn when a Customer is over concentrated in a specific industry.
If you have sustained losses in your portfolio after your broker purchased USO, you may want to speak with an experienced attorney to determine if your broker over-concentrated your portfolio. You may be entitled to recover your losses.
Seth Hill is an attorney at Halling and Cayo, a full service law firm in Milwaukee, WI and part of its Securities Litigation team.
He focuses his practice on creditor’s rights, collections, business law, insurance defense, and business and commercial litigation.