Difference Between Share Market And Commodity Market Is Bound To Make An Impact In Your Trading
This is no longer an era where investment is limited to stocks. From bonds to shares to mutual funds to commodity, you can use multiple trading methods to diversify your portfolio and maximize your profit. Even if one trading industry crashes, investors don't lose all their money as they have already reduced their risks by investing in other forms of trading. While the difference between the share market and commodity market is quite clear to most of the investors, beginners still wonder "how share market differ from the commodity market". Or, what is that unique factor you can expect from a commodity market? Let's start with the stock market.
What is the Stock Market?
There are several stock exchanges in a country, for example, the Bombay Stock Exchange and National Stock Exchange are the famous stock markets in India. Similarly, New York has two of the world's most famous stock exchanges namely Stock Exchange (SE) and the NASDAQ Stock Market. In the stock market, traders represent buyers and invest in the shares of a specific public company. If the price of these shares goes up, the investors enjoy the benefits. On the contrary, if prices fall down, the investors bear the loss.
What is Commodity Market?
Similar to the stock market, a commodity market can be defined as the financial marketplace where the selling and purchasing of commodities take place. Basically, traders invest their money in raw materials that are used for the manufacturing and production of other high-value products. You can purchase the same commodity from multiple sources and sell it to different customers. Gold, silver, platinum, crude oil, petroleum, and other such raw materials are traded in the commodity market. It is often considered a hedge against inflation and economic uncertainties.
Difference Between Commodity Market and Stock Market
As mentioned above, the commodity market is somewhat similar to the stock market as it is a financial platform where trading takes place. But instead of investing in shares, traders put their money on precious metals, oil, petrol, gas, and other such commodities. Here are some other differences between the commodity and the stock market.
· Time Duration
The major difference between the stock and commodity market is the time they remain on the exchange. The shares usually remain on the exchange for years, and the organizations that have issued it keep on doing their business. On the contrary, companies sell commodities in the form of future contracts.
· Better Knowledge
When you invest in the stock market, you need to look into the financial condition of the company, transparency, and authentication of the organization before buying its shares. The financial knowledge in the stock market is important as you cannot risk your money. On the other hand, you don't need to run this background check in the commodity market as commodities are transparent by nature. As they are natural resources, a human cannot manipulate their prices.
These were the major differences between the commodity market and the stock market. It is always better to diversify your portfolio by investing in both sectors.