Commodities

Commodity market involves trading of metal, agricultural items, and energy. The market is negatively correlated to equities, thus serving as an important avenue to diversify the portfolio.

Why Invest in Commodities?

• Leverage: Allowed leverage is very high which magnify gains as well as losses.
• Distinctiveness: Principles of supply and demand drive the commodity prices. For instance, unusual weather patterns affect agricultural output thus driving the price upwards.
• Hedging: Commodities are alternative asset class which are negatively correlated to equites and are also good hedge against inflation and gold.
• Suitability: Commodities are more volatile than equities and therefore is suitable for investors with high risk tolerance.

Currencies

Forex market involves buying and selling of global currencies for either speculative or hedging purposes. It is highly liquid market and trades 24 hours.

Why Invest in Currencies?

• Leverage: Allowed leverage is very high which magnify gains as well as losses.
• Flexibility: High trading volume, markets open 9:00 am to 5:00 pm, lower transaction costs, and variety of trading options are available.
• Hedging: Important tool for exporters and importers to hedge their payment and receipts positions against foreign currency fluctuations.

Suitability: Currency markets involves counterparty risk as there is no clearing exchange which guarantees trade. Suitable for individuals with high risk tolerance and importers and exporters looking to hedge price risk.