What are the Advantages
of Futures versus Stocks?
When thinking about how to invest in the stock market, most people immediately think about finding a fast moving stock, Apple, Google, etc. However, it is important to know that the stock market provides investors a multitude of ways to invest their money. A Financially Literate investor takes the time to educate himself on those opportunities in order to find the right investment vehicle for his or her goals and objectives.
One alternative to investing in stocks is Futures Trading. Futures Trading is a form of investment which involves speculating on the price of a commodity going up or down in the future. Futures trading is mainly speculative ‘paper’ investing. In other words, it is rare for an investors to actually hold the physical commodity, just a piece of paper known as a futures contract. The most common commodities are:
- gold
- steel
- cotton
- corn
- wheat
- currency
- Leverage – To own a futures contract, the investor only has to have a portion of the value of the contract
- Liquidity – It usually easy to get in and out of positions
- Commissions – Commissions tend to be cheaper with futures contracts
- Speculative – As we mentioned, you do not actually have to own the actual commodity
- No Day Trading Rules – The Day Trading rules do not apply to futures contracts
Watch the video to learn more about what are the advantages of trading Futures versus stocks:
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