Commodity Market – An Ideal Platform for Capital Investment

A commodity market is a market where trades take place in primary rather than manufactured products. These products include soft commodities & hard commodities. Soft commodities include agriculture products like wheat, coffee, sugar along with various others. Hard commodities include gold, silver, oil etc. Unlike stock & share market, goods can be delivered physically in commodity trading as per investors’ needs & requirements. In India, there are many people, who are interested in investing in this market according to their custom needs & requirements; that too within their financial budget.

There are two main exchanges where commodity trading takes place by investors. One is MCX (Multi Commodity Exchange of India Ltd.) while another is NCDEX (National Commodity and Derivatives Exchange). MCX is an independent exchange of India, which was situated in Mumbai and established in 2003. In 2009, it was declared as the world’s sixth largest exchange, which were traded with commodity. It offers futures trading in bullion along with energy, ferrous & non-ferrous metals. And various agricultural commodities like wheat, potatoes, mentha oil, cardamom, palm oil etc. It has taken the third place amongst the global commodity bourses in terms of the number of future contracts traded in 2012.

Along with MCX, NCDEX (National Commodity and Derivatives Exchange) is another dominant online multi commodity exchange in India. It is a national level exchange which operations are managed by an independent board of directors and professional management. Moreover, it’s regulated by FMC (Forward Market Commission). NCDEX offers futures trading in 31 agriculture and non-agriculture commodities. It facilitates delivery of various commodities through a network of over 590 accredited warehouses through 8 warehouse service providers with storage capacity of around 1.5 million tonnes.

Although commodity market provides an ideal platform for capital investment for investors in India but at the same time, you can lose your hard-earned money if you do it without any proper guidance of a prominent commodity advisory firm. Your capital would be at a high risk if you don’t do investment in commodity market without getting any proper guidance of experienced financial advisor & analysts. For this, you should choose a prominent financial advisory, which has been providing affordable, accurate & beneficial services in India for many years. Accuracy & effectiveness of commodity tips provided by these institutions must be observed thoroughly by investors so that they could decide that their services are well suited for them or not. In this era, there are several sources available by which you can check accuracy of data of various commodity advisory firms and take your decisions to make an ideal investment.

Setting Your Money Goals

3 Factors which determine your investment strategy

You may be wondering what is the right investment strategy for you, but without knowing anything about you, any advice on which investments are right for you may in fact be the wrong ones. There are basically three factors that determine which are the right investments for you, they are:

1. Your age

2. Purpose for the money

3. Your risk profile

Starting with your age. It would be rather silly of you to invest all your money in growth funds if you are aged 65 because if the market takes a dive such as was the case during the 1987 sharemarket crash and to a lesser extent, the Global Financial Crisis during the early 2000s you have less time to recover from these setbacks whereas the young ones have time on their side.

The purpose for the money is the second factor.

Decide whether you require the money in the short-term, medium-term, or long-term.

Short-term would be up to a year.

Medium-term is 1-5 years

Long-term is longer than five years

Short term expenses would be, a bank account for emergencies, a holiday within a year, dental expenses, or t pay for the kids schooling for a year.

Medium-term would be savings for a car.

Long term would be your retirement fund, saving for a house deposit, or saving for the trip of a lifetime.

Your risk profile is a determining factor in where you invest your money. If the thought of the sharemarket taking a dive will give you sleepless nights then investing growth stocks in the sharemarket is not for you. A better option would be managed funds where you will be given a choice between growth, balanced, and conservative funds.

It is important not to get into debt for there is a cost to debt and that is interest. Interest adds to the cost of goods bought with borrowed money, and this adds up to a fortune during a lifetime of borrowing for consumables. This is called bad debt because the value of the item declines over time.

There is such a thing as good debt though and this is your first home because the value of the property increases during the lifetime of the loan but even this is not always a good option for some people if you live a kind of transient lifestyle.

“Everyone is to their own,” so only you know what makes you tick so your personal circumstances are the determining factors which govern where best to invest your savings.

You must do your homework before you invest in anything, whether that is the sharemarket, managed funds, or gold. There is so much information available on just about everything, and that includes finance. It is just a matter of learning the ropes and having a financial strategy which suits your personal circumstances.

Learning to Trade Commodities

Many new traders ask how long it takes to learn to trade in commodities. It can take a couple of months for a diligent individual to learn to trade commodities. However, for those, who question about mastering trade commodities, they should know that it also may take a lifetime to trade commodities.

If you wish to make consistent profits from commodities trading, you will have to trade consistently. Never trade with the intention of making large sums of money right away. This is why usually 80% to 90% of the traders lose their money through trading commodities. When you are learning to trade commodities, a time will come when you achieve the breakeven point. This is the point where trading becomes profitable.

Commodity trading is held in commodity markets. It can be the derivatives market or even the spot market. In the derivatives market, commodities are traded via different financial instruments whereas in spot market, commodities are bought and sold hand to hand. Usually,Futures is a financial instrument that is used for trade exchanges in the commodity market.

Futures exchange is a standardized contract. It is set on the basis of particular futures exchanges. These include the size, the type, and quantity of the commodity along with the transaction price and the place where the commodity is to be delivered.

Some regulated Futures Exchanges negotiate the future contract. It is a place where the buying and selling orders are brought to a single place on the exchange.

A trading floor or trading computer is required for carrying out transaction in the commodity future market. This exchange takes place among the brokers, who are the members of the exchange of a particular commodity, which is to be traded. Both buyers and sellers are going to have a broker. They will transmit the purchase and sale order.

While you are learning to trade commodities, you see that the buyers and sellers of commodity futures contracts have certain obligations. The buyer has to take delivery and pay for the cash commodity. The time frame for the commodity contract is set. The seller has to deliver the commodity for which he has paid the price that was set for the exchange. The price can change on the quality of the material supplied. The obligations of the buyers and sellers can be eliminated by offsetting the trade exchange before the due date of the contract. This is usually how spectators trade in the commodity markets.

Just like every other type of trading, for commodity trading, you have to open a trading account with the commodity broker. Just choose the broker carefully when you are planning to take recommendations from the trader. Make sure that the trader provides a good trading commission along. The broker is going to be responsible for connecting buyers and sellers. Through the trading accounts, the trader can continue on the exchange himself too by using the computer. This method of trading has become quite preferable among the traders, as it is convenient and quick. Just contact a licensed broker for trading.