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Trading platforms allow people to earn good returns by investing in various instruments like stocks, currencies, and bonds. Real estate investment is also seen as one of the most lucrative forms of investments, but you will need higher capital. Another great option for earning returns is by investing in commodities.
However, entering the commodity market can be overwhelming for beginners. Considering this, it is best to start by learning how to read commodity charts. For instance, if you are looking forward to investing in oil, read the charts to know the oil price forecast.
Also, as a beginner, you can start trading using the demo feature of trading platforms. Create an account with a trusted trading platform like VSTAR. You can now trade on real-time market movements, but you won’t be using any money and thus won’t lose any money. With time, when your skills improve, gradually move to real trading.
Different types of commodities to consider
There are four types of commodities –
- Agriculture
- Livestock
- Metals
- Energy
Before you start investing in any one or every one of these, it is best to know their main differences. Understanding these commodities will help determine, which commodity best fits your financial goals and risk tolerance.
Agricultural:
This commodity covers all the crops falling in the agricultural sector. Popular agricultural commodities are cocoa, coffee, cotton, corn, wheat, and sugar. Risks associated with agricultural commodities generally revolve around weather and season-related changes. On the other hand, profits are connected with population growth and limited supply.
Livestock:
This commodity specifically deals with cattle, chickens, and other animals. Risk factors associated with this commodity are less compared to those with crops, but it is not completely risk-free.
Metals:
Both base and precious metals fall under the category of metal commodities. Base metals are used for industrial purposes and are comparatively cheaper, while precious metals are higher in price. While no commodity is completely immune to market risks, gold is one such metal that has proved to be a reliable investment option. You can refer to some gold trading tips before putting your money in.
Energy:
Crude oil, gasoline, natural gas, and heating oil fall under the segment of Energy commodities. As a result of development, the demand for energy-related products has always increased. This means, investing in energy commodities will always prove to be fruitful. However, if the economy crashes, it will also affect the demand for energy commodities.
Figuring out the right time to invest in commodities
Inflation is a reliable indicator of the right investment time. The thing is, investing in commodities safeguards investors against inflation. So, if inflation is on the rise, it is best to strategically invest in commodities. However, predicting inflation is difficult now as the market continues fluctuating from the COVID-19 impact.
Finally, consider the two most important factors when investing in commodities – demand and supply. While the consistent global demand usually benefits all investors, some commodities perform better. As a beginner, consider investing in safe commodities like crude oil, gold or base metals.
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