At commodities they are goods essential for developing nations with a major impact on the global economy.
You’ve probably seen analysis of the rises and falls in commodity values in the economic news. But do you really know how this type of investment works?
Next, you’ll learn everything you need to know about what commodities are and the best tips for entering this market. Interested? Keep following the post!
What are commodities?
The term commodity, in London, means “merchandise” and refers to low-grade raw materials, produced on a large scale and marketed all over the world.
These goods can be stored without loss of quality, in addition to serving as a basis for derived products.
To better understand this relationship, just think about the products we consume on a daily basis and how they are produced.
Wheat, for example, is the commodity that gives rise to the bread we eat for breakfast. Likewise, fresh chicken gives rise to nugget, the beef fat and so on.
What makes commodities important worldwide is the fact that they are traded in several countries and have uniform production characteristics.
Because they have a global quotation, every time prices fluctuate, the financial market feels the impact be it positive or negative.
>> Want to know more about the investment world? Check out this other blog post: Types of investments: 7 most profitable options in the UK <
What are the main types of commodities?
At commodities are divided into four categories:
- agricultural: soy, corn, coffee, cotton, live cattle, wheat, and biofuels, among others;
- environmental: water and wood;
- minerals: oil, ethanol, gold, natural gas and minerals in general;
- financial: basic products of the world economy, such as stock exchange indices, public titles and coins (dollar, Pound, etc).
As it has a very strong agricultural sector, the main commodities in the UK residents market are agricultural. However, this does not mean that investing in them is a guarantee of success: the value of each commodity is related to the law of supply and demand, as we will see later.
How does the market for commodities?
Commodities are traded on the Futures Market, an environment within the stock Exchange where contracts for the purchase and sale of assets for a future date are negotiated. The goal is not to receive the final product, but profit from price fluctuations that change daily.
This variation in values occurs according to the supply and demand of products in the world market. Therefore, the more investment information and vision the person has, the greater the chance of earning money from trading commodities.
In practice, the Futures Market it works based on purchase and sale intent contracts. Even before slaughtering cattle or harvesting a crop, the producer agrees a price with the buyer today for delivery and payment at a future date.
If within the agreed period the price is below the agreed price, the seller who receives the difference will profit. If the value is above, who wins is the investor.
Thus, it can be said that the purchase and sale of commodities works very similarly to trading other assets on the market for variable income.
How to invest in commodities?
The step by step to invest in commodities It’s simple. Just open an account in a investment broker, transfer the money and access the Home broker. It is there that you will have access to offers for buying and selling.
For those who don’t know the Home broker, it is an online platform that connects the client, the broker and the Stock Exchange in a simple, fast and efficient way.
Contracts are traded using six-character codes that indicate the asset, expiration month, and expiration year.
In practice, fworks like any BM&FBovespa electronic auction. Therefore, those who are already used to the stock market will be able to carry out the process with ease.
On the other hand, those who do not yet have experience with variable income should be more careful. Not because of the system, which is simple to operate, but because of the risks involved in this type of investment.
How to avoid risks?
Before entering a negotiation of this type, you need to study and prepare a lot. After all, we are talking about a market for variable income in which index fluctuations are constant and unpredictable. What was good yesterday may not be good today and there are many factors that can influence these changes.
Therefore, take courses and consume a lot of content about the topic before venturing out. There are several books and videos by competent experts that can introduce the subject in a didactic and understandable way for those who are just starting out.
Read economic news and participate in discussion groups are also great practices. Thus, you can find out about what is happening in the market and exchange ideas with other people who understand or seek to understand about variable income.
If you decide to invest in commodities without knowledge, you will run a great risk of losing money without even knowing why.
Many people see the Stock Exchange as a bet, committing a considerable part of their own assets in extremely risky plays.
However, keep in mind that we are not saying this to put you off. The commodity market can be very profitable for those who have the necessary knowledge. So when you feel safe and ready, don’t hesitate to invest if you think it’s worth it.
Now that you know what they are commodities and how to invest, how about putting what you learned into practice? With information and research, this can be an excellent opportunity for you to increase your income!
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