The investment world can change fast. In the Spring of 2025, some financial experts (not us!) expected the Federal Reserve to raise interest rates to preempt tariff-induced inflation. Bond yields were climbing, and stock markets were pulling back after a strong start to the year.

But the situation has shifted again. Economic growth is projected to slow down, and the Fed is now easing short-term interest rates. At the same time, the U.S. government faces the challenge of managing nearly $38 trillion in debt, adding pressure to the bond market.

There’s more. Global trade tensions are abnormally high. And technology stocks – which had driven much of the market’s gains in recent years – are at, or near, all-time high prices.

These factors—rising debt concerns, bond market and trade uncertainty, and tech sector valuations—have made both stock and bond markets more volatile. No one could have predicted how quickly things would change. That’s why MoneyLetter continues to advise investors to stay calm and think long-term. One smart strategy to consider during uncertain times is dollar cost averaging (DCA).

What is dollar cost averaging?

Dollar cost averaging means investing a fixed amount of money at regular intervals, like monthly or quarterly, into mutual funds or other investments. The amount you invest stays the same, but the number of shares you buy changes depending on the price.

When prices are low, you end up buying more shares. When prices are high, you buy fewer. Over time, this often results in buying more total shares than if you had invested all your money at once.

Why dollar cost averaging works

DCA takes emotion out of investing. It helps you avoid the fear of missing out when prices rise and the panic of selling when prices fall. While it’s possible that investing a lump sum at the right time could earn more, it’s very hard to know when that “right time” is. Trying to time the market precisely usually doesn’t work.

If you’re still working and saving for retirement or college, DCA is a great way to build wealth over time. If you receive a lump sum—like a bonus or inheritance—DCA lets you ease into the market slowly, reducing risk. If you have a 401(k) plan at work, you’re already using DCA. Money is taken from your paycheck and invested regularly, no matter what the market is doing.

DCA works best with no-load mutual funds or ETFs, which don’t charge commissions. It’s especially helpful during times of market ups and downs, like we’ve seen recently. While markets can struggle for a while, they tend to grow over the long term.

What if you need cash?

Sometimes, you may need to take money out of your investments, maybe to build an emergency fund or to cover living expenses in retirement. Selling investments using a DCA-like method (selling the same amount regularly) is not a good idea. This is called reverse dollar cost averaging, and it can hurt your portfolio. You end up selling more shares when prices are low and fewer when prices are high, which can reduce your future growth.

Instead, here are some smart ways to raise cash during market volatility:

• Rebalance your portfolio: If stocks have dropped and bonds now make up a bigger part of your portfolio, consider selling some bonds first.
• Review your investments: You might have holdings that no longer fit your goals or have underperformed. These could be good candidates to sell.
• Harvest tax losses: If you have investments that are worth less than what you paid, selling them can help offset gains or reduce your taxable income (up to $3,000 per year).
• Think about taxes: If you must sell investments for a gain, try to sell those you’ve held for over a year. Long-term capital gains are taxed at a lower rate than short-term gains.

If you have any questions, feel free to email us at service@moneyletter.com.

You can schedule a free 20-minute Discovery Call with Bruce Hardy, Director of Private Asset Management at Asset Strategy, to explore your best options:
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The energy sector offers compelling opportunities for investors seeking alternatives beyond traditional stocks and bonds. Oil and gas continue to play a dominant role in the global energy landscape. According to the U.S. Energy Information Administration (EIA), fossil fuels are projected to account for approximately 80% of the U.S. energy mix through 2050, even as renewable energy sources gain traction. 

Energy demand is not just persisting; it’s growing. The rapid expansion of data centers, artificial intelligence (AI), and high-performance computing drives an unprecedented need for reliable, continuous power. These sectors require enormous amounts of electricity, with data centers alone consuming over 2% of global electricity (a figure expected to rise dramatically). While renewable energy sources are expanding, they remain intermittent and heavily dependent on infrastructure advancements. 

Meanwhile, nuclear energy, often touted as a long-term solution, remains decades away from achieving widespread, cost-competitive adoption. The challenges of construction costs, regulatory approvals, and waste management make large-scale nuclear deployment a long-term ambition rather than an immediate solution. 

Given these realities, oil and natural gas continue to be essential energy sources, not just for transportation, but also for industrial applications, heating, and as a backup for renewables.
For accredited investors, one avenue worth exploring is oil and gas drilling funds. Unlike publicly traded energy stocks or ETFs, these investments offer direct participation in resource extraction and unique tax advantages. While they require a higher level of sophistication and risk tolerance, they can provide substantial long-term benefits when properly structured. 

For non-accredited investors, energy exposure is still possible through mutual funds, ETFs, and energy sector index funds, though these vehicles do not offer the same tax advantages as direct oil and gas investments. However, they can provide diversification benefits and access to the broader energy sector without the higher risks associated with private investment funds. 

The following sections will explore the fundamentals of oil and gas investments, the tax incentives that make them attractive, and the key risks to consider before committing capital. If you’re an accredited investor looking for diversification, tax efficiency, and exposure to a critical sector, this deep dive will provide the insights you need.

First, what is an Accredited Investor? 

Under SEC regulations, an accredited investor is someone who meets specific financial criteria allowing them to invest in private securities, such as oil and gas drilling funds. To qualify as an accredited investor, an individual must:

• Have an annual income of at least $200,000 (or $300,000 for married couples filing jointly) in each of the last two years, with an expectation of maintaining this income level, or 
• Have a net worth exceeding $1 million, excluding the value of their primary residence. 
• Certain entities, trusts, or businesses may also qualify if they have assets exceeding $5 million or if they consist of accredited investors. 
 

Because these investments involve higher risks, they are generally limited to accredited investors who have the financial capacity to absorb potential losses.

Why invest in oil & gas?

Longevity – Despite advances in renewable energy, oil and gas will remain a significant part of the energy mix for decades.
High Demand – A critical resource used across numerous industries globally.
Diversification – Offers uncorrelated returns compared to traditional stock market investments.
Tax Benefits – Unique tax incentives make these investments particularly appealing.

Tax Advantages for Investors 

One of the most compelling aspects of oil and gas investments is their tax treatment, which provides significant benefits for accredited investors:

Intangible Drilling Costs (IDC) 

• Can represent 70-80% of a drilling fund. 
• Up to 100% tax deductible in the first year. 
• Can be deducted against salary, capital gains, or business income. 
• Includes expenses like site preparation, labor, and testing. 

Tangible Drilling Costs (TDC) 

• Can represent 20-30% of a drilling fund. 
• 100% tax deductible but depreciated over 5-7 years (1245 MACRS), which may be subject to bonus depreciation. 
• Covers costs such as drilling equipment and infrastructure. 
Mineral Interest Depletion Allowance 
• Allows a 15% deduction on gross income from oil and gas properties. 
• Only available to small producers and joint venture participants. 
Active vs. Passive Income Treatment 
• Oil and gas investments are typically classified as active income in the first year, allowing depreciation to offset other earnings. 
• In subsequent years, investments shift to passive status, limiting liability but maintaining tax advantages. 
• These investments can also be used strategically to reduce Roth conversion taxes. 

Return potential & portfolio diversification

• High oil prices and productive wells can generate substantial gains. 
• Double-digit annual returns have historically been common, though past performance does not guarantee future results. 
Diversification Benefits 
• Adds an alternative asset class with a low correlation to traditional stocks and bonds. 
• Provides exposure to a sector influenced by different economic factors than equity markets. 

Risks to consider

• Dry Wells – Not all wells yield commercially viable quantities, though technological advances have improved success rates. 
• Unexpected Costs – Operating expenses can be higher than expected, impacting profitability. 
• Revenue Variability – Oil and gas prices fluctuate, affecting cash flow. 
General Partner (GP) Liability 
• Investors may have liability exposure in the first year, but this is mitigated by utilizing insurance coverage or conversation to Limited Liability (LP) ownership. 

Tax Considerations & Limitations 

Alternative Minimum Tax (AMT) – May reduce the tax advantages available to certain investors. 
Excess Business Loss Limitations – Caps the amount of losses that can offset non-business income ($320,000 for individuals, $640,000 for joint filers in 2025).

Is oil & gas right for your portfolio? 

Investing in domestic oil and gas reserves offers accredited investors unique advantages, including significant tax benefits, portfolio diversification, and strong return potential. However, these investments come with risks, including price volatility and operational uncertainties. For non-accredited investors, ETFs and mutual funds provide accessible alternatives to participate in the energy sector, though without the direct tax advantages of oil and gas drilling funds. 

For those seeking exposure to energy in a tax-efficient manner, oil and gas investments can be a powerful tool, but they require careful due diligence. Consulting with a financial professional can help determine if these opportunities align with your investment goals and risk tolerance. 

If you need financial advice or a financial review, we would be happy to introduce you to a licensed advisor at our sister company, Asset Strategy Advisors (ASA).

ASA is an SEC registered investment advisor.

Visit our Contact page to click the button below to speak with the Asset Strategy Advisor Team.