You should keep in mind that you can still lose your money investing in a trust the same as with any stock.
In fact, many passive trusts are structured as a "return of capital" which is why they often get a more favorable tax treatment. That is because the oil or gas or whatever eventually runs out if there is not an active program engaged to replace the reserves. As that happens, the unit price goes down and down. The royalty payments are supposed to compensate the unit holder as the air is let out of the balloon so to speak but this is not always the case that what gets received will equal or exceed the initial investment. "Mature" royalty trusts may not be such a great bargain if their reserves are almost all used up. mosh was thought to be pretty much one of these, it was thought to be all fizzled out as reflected in the vanishing unit price until the new information came to light. but this is a very rare and exceptional event.
Otherwise it would have likely terminated ( the equivalent of bankruptsy), remaining shareholders lose their money -- as many trusts do.
I used to really like pwi (prime west) which had a nice balance, savvy active management who balanced the cost of replacing reserves vs. return but they just got bought out by an arab outfit. The remaining ones out there are somewhere in between. All seem to be sagging now probably due to escalating rig costs (offshore rigs at $100,000 / day etc) i.e. huge costs of replacing reserves.
My impression is that trusts are at the end stage of the process. Exploration is the beginning phase.
Bottom line: One needs to research trusts just as carefully as stocks before investing. (trading is another matter but bears its own set of risks--one has a lot more frequent oppurtunities to screw up, with investing you have to wait a lot longer to see if you screwed up <g>).
AI
