Investors have myriads of choices when they want to diversify their portfolios. From shares to commodities, you need to choose the best amongst them. But before buying, you should have the requisite knowledge about the Share and Commodities Market. So, before we jump on the comparison of which one is easier to trade, let us first understand the concepts.
Commodity Trading
Commodity means any raw material or agricultural produce that can be bought and sold in the market. Examples include wheat, soya, sugar, crude oil, gold, silver, and more. Commodity Trading refers to trading in various commodities and their derivative products. They are primarily categorised into agricultural, material, and energy.
Usually, this market is traded through Futures Contracts, which hedges and minimizes the risk of financial loss. Since commodity markets are of two types: virtual and physical, where commodities can be bought and sold, there are various ways to make Commodity Investment. Direct investment and investing in Commodity Futures Contracts are some of them.
Share Trading
Through Online Trading, you can trade in the shares of the listed companies. Online Trading allows the investor to buy and sell shares of the company without much of a hassle. For Online Trading, you need to understand the fundamentals and technical analysis that affects the change in share prices, which can be a little cumbersome for someone new. Investors’ holdings keep changing due to various factors in the market.
Also, you can decide upon the period you wish to keep the funds invested in the stock. It can be for a short period or a more extended period. For trading, you need to open a Demit and Trading Account.
Commodity Trading Vs. Online Trading?
You do not require detailed fundamental analysis for trading in the Commodities Market. There are a few things that you should monitor while trading commodities, as the whole game depends on demand and supply. If the monsoon is on time and agricultural produce is good, the commodity prices rise. Similarly, if the metal markets are booming, their prices increase and vice-versa. However, many factors affect the markets, such as:
Inflation: This is a red signal when it comes to stocks. However, commodities respond positively to it.
Volatility: Stocks are less volatile than commodities as the demand and supply keep changing due to geo-political reasons.
Margins: Compared to Equity Trading, Commodities require less margin. As a result, it enables traders to take on more significant risks, which could be dangerous during quick and abrupt movements.
Conclusion
For a new trader, investing in commodities is relatively easy as it depends upon demand and supply, while investing in stocks requires detailed knowledge. So, there are fewer variables to consider when you decide to invest in a commodity. However, it is always imperative to understand the pros and cons of investing.
