Story Comments

An strategy that sounds good until one takes a look at the tax consequences! My strategy which some may find a related strategy, has involved owning a basket of Canadian Energy (O&G, coal and forest product) Trusts. By selling up to 50% of your short term positions in partial lots for gains each year in this Memorial Day season and buying back shares between Thanksgiving and MLK W/E we find we generally net a very decent capital gain. The 15% Canadian tax is claimed as a tax credit. Selling most or all long term gains as well for LT tax savings. The +10% dividends are tax advantaged. The short term gains allow you to own shares on margin and deduct the marg interest against the ST Gain. Effectively xforming ST gains to tax advantaged dividends. The monthly income is used to pay for my heating oil.

From the author: The $5,800 figure is correct, although I should have given readers some more information on how it was calculated. Collins estimated the family would drive one car more than the other. The car that is utilitzed more often has a lower gas mileage that requires more fill-ups. Hence the $550 difference between the $5,250 HaneyK1 calculated and the dollar amount in the story. To see Collins' example in more detail copy and paste this link into your browser: http://greenspringwealth.com/HedgingAtThePump.aspx

Thanks for taking the time to write in.

Rob Wherry
rwherry@smartmoney.com

Nice catch haneyk1 !
You are right. 35,000 miles a year at 20 miles to the gallon means the family buys 1750 gallons of fuel a year. At $3 a gallon, they pay $5250 each year. If fuel goes to $3.75 a gallon, their spending goes to $6562.50. The 75c increase in fuel prices relates to a 25% increase in fuel costs to the family, and the annual increase is $1312.50
I applaud Mr. Collins' idea however. Hedging fuel costs is something the airlines have done a poor job at, and, as Mr. Collins illustrates, it does not have to be a complex process.
One more idea: Take a look at the socially responsible angle: Investigate the purchase of 'clean energy' ETFs to hedge!

I may be crazy but my math works out a little differently. I get the family paying $5,250 per year. Can some one help me out.

Good Idea... with ETF's all you want, but I just take $10,000 & Buy Black Rock Global Resources Fund (SSGRX)and It's Top Energy Stock on margin & Another Fund's Top Energy Stock > XTO.. being +25% YTD and more importantly over 540% past 5 yrs,helps pay my Combined Energy Bills for both the Car and Home..( It's just too bad our Social Sec. $ couldn't be partially Invested in Energy Funds like these, the past 5 yrs ) :.(