The advantages of investing in commodity futures over stocks in the market

Commodity futures are contracts between buyers and sellers to buy and sell a commodity at a specific amount and on a predetermined date. If the price of a commodity rises before the predetermined date, then the buyer buys it at a lower price and can sell it at a higher value.

Stocks in the market are equity investments that represent a part of ownership in a corporation. This means you are entitled to part of that corporation’s earnings, assets and voting rights on anything concerning the corporation and its operations.  This doesn’t guarantee the payment of dividends.

There are several reasons why investing is a good idea, however, we have put together 3 reasons why investing in commodity futures is better than investing in stocks.

High leverage

You can invest in a commodity future without putting out the full amount but rather just a small portion of the amount. This is usually about 10% of the overall amount. This makes trade futures more exciting and accessible. Stock leverage isn’t as high as it involves having capital that needs to be put down to invest in stocks.

Liquidity

Unlike investing in stock markets, investments in commodity futures offer high liquidity. The constant presence of buyers and sellers makes it easy to buy and sell commodity futures and liquidate your position whenever you need to.

Hedging

Only investing in stock markets means that you are at risk of having your investment depreciated during the event of wars, economic crises. Investing in commodity futures means that you can hedge against such risks as some commodities rise in value during a time of crisis.