Commodities are basic physical stuffs, or you can call them resources, which we use as raw materials.For example, gold- we use gold to make jewelry, cotton- used to make clothes, rice and dals- used to cook food. As consumers, we do not trade in them. We just buy and consume, use it. However, as we know there are people who buy and sell them further for profits.
The returns from investing in commodities is based on the price fluctuation of therespective commodity. Unlike shares and debentures, there is no additional dividend or interest income here.The way we hold equity and debt securities for longer period for better yields, holding commodities means more storage expense. Not to forget, to transfer the ownership of this investment requires transportation costs too. [Read more…] about Basics of Commodity Trading