The investment space has flourished beyond bounds in recent years. From stocks and forex to cryptocurrencies, most trading alternatives have attracted a global user base. However, despite the growing number of trading options, many still consider commodities investing a reliable earning medium.
Commodities investing is the process of buying or selling financial assets, physical commodities, and currencies using live economic calendar as a way to make proper strategies. Investors can adopt multiple approaches to invest in commodities like buying raw assets or ETPs. Both options can result in a good deal of profit depending on the investors’ experience and preference.
Traders need to make necessary calculations to maximize their profit. This cannot be done without a basic understanding of the concept, so here is everything investors should know before indulging in commodities investing.
Pros and Cons of Commodities Investing
Like every other financial instrument, commodities investing has its share of several pros and cons too. Here is a brief overview of both aspects.
Advantages
Diversification
Commodity stocks and commodities offer different returns from competitor bonds and stocks. Moreover, a trader with limited investment is more exposed to risks and volatility. Under such circumstances, commodities investing is the ideal way to secure funds and future profits.
Profits
The value of commodities can fluctuate due to different factors, like exchange rates, economic health, inflation, etc. Smart traders can diversify their portfolios and earn huge profits on commodities depending on the market situation.
Probable Hedge Against Inflation
Inflation can affect the value of bonds and stocks, potentially plummeting them for a long time. Commodities have shown viable resistance against such concerns on several occasions. While that does not make them foolproof against inflation, it provides a reasonable hedge to traders.
Cons
Volatility
Volatility is the primary concern regarding multiple financial products, and commodities are among them. Exchange-traded products or mutual funds that monitor a single commodity or sector can exhibit higher volatility. So, traders should use trading software like Banxso to minimize such concerns.
Principal Risk
Commodities can be highly volatile, causing their prices to fluctuate significantly. Events like worldwide competition, economic instability, import controls, etc., can affect commodities’ prices, raising the chances of commodities losing value quickly.
How to Trade Commodities?
Here are the most prevalent methods to trade commodities:
Direct Ownership: The simplest and the most common way to trade commodities is owning them. It can mean owning a commodity or buying them through a broker.
Exchange-Traded Funds: ETFs also cover a wide area from gold to corn, offering diversity to traders. Its timing matches with the traditional stock exchange, providing ample time to conclude transactions.
Mutual Funds: Mutual Funds focus on single commodities, making them a big hit or miss. However, using trading software can help traders find the best alternative with minimal risk.
Why Choose Banxso for Investing in Commodities?
Banxso, the FSCA-licensed trading venture, offers secure solutions in multiple fields. These include commodities, forex, stock, cryptocurrencies, and more.
Besides the financial instruments like DMA shares & more, Banxso also offers analytics software and insights to assist traders. The tools are supported by AI technology, allowing them to assess the market and provide viable information.
Moreover, new users can create a free account on the platform to access commission-free services. With such solutions, Banxso emerges as the ideal platform to trade commodities and several other securities.