If you have been planning to start trading, stocks are the first thing that comes to mind. However, as volatile as the stock market is, the fluctuation in prices and profits is always a reason for concern. Thus, a stable and lucrative trading parameter can be commodity trading.
Commodity trading is when various commodities are bought and sold. These commodities can be raw materials, primary agricultural products, or even gold and oil. One of the benefits of commodity trading is the price of commodities that keep increasing because of the growing demand. Even in the case of inflation, investors prefer commodity trading as it protects their capital.
However, before you begin commodity trading, it is essential to know their categories and benefits. To start with, here is a list of national commodity exchanges in India.
- Multi Commodity Exchange of India (MCX)
- National Commodity and Derivative Exchange (NCDEX)
- Indian Commodity Exchange (ICEX)
- National Stock Exchange (NSE)
- Bombay Stock Exchange (BSE)
Benefits of commodity trading:
As individuals, you can start trading on your own through self-trading platforms or even appoint the best commodity broker for trading. Yet, it is critical to realize why you need commodity trading and its benefits.
Diversification
In the case of inflation, stocks perform well when the rates are the same or reduced. On the other hand, even during inflation, prices of commodities seem to be performing better. Since commodity returns have a lower or almost negative correlation with stocks, a commodity can be advantageous to diversify your investment portfolio.
Protected against Inflation
The growing demand for goods and services leads to an increase in the price of goods, thus leading to a surge in commodity prices. Contrastingly, inflation may lead to a decline in profits and company growth affecting their stock prices. Hence, commodities are a beneficial hedge against inflation, which even helps in maintaining your purchasing power parity.
Reduced risks
A conflict, riot, economic crisis, or natural disaster do not cause the change of price for commodities. How? Crisis interrupts the regular supply chain system leading to scarcity. In such a scenario, it is even challenging to buy raw materials. Thus, leading to an increase in prices of commodities. Yet, in crisis, stock prices are seen as unstable and unsteady. Therefore, commodities are a risk-free source of investment.
Hence, you can start capitalizing today with commodity trading. If you are still not confident about how to trade yourself, you can reach out to the top trading companies in India for effective results. They guide and provide you with assistance at every stage of your trading experience.
