Many advantages make this investing an attractive option for those based in the UK when trading commodity futures. Here are reasons you should consider trading commodity futures if you’re looking to add diversity to your portfolio or take advantage of the potential for high profits.
Diversification
Firstly, one of the critical advantages of commodity futures is that they provide diversification in a portfolio of traditional stocks and shares. It is vital given the current climate of political and economic uncertainty in the UK to spread your investments. You can reduce your reliance on one particular asset class and spread your risk more effectively by investing in commodities.
Potentially higher returns
Another advantage of commodity futures is that they offer the potential for higher returns than many other types of investments. Commodities are often considered more volatile than stocks and shares, meaning there is more significant potential for price movements – both up and down.
Access to a global market
You’re not just limited to the UK market when you trade commodity futures, and you can access a global market that covers a wide range of different commodities. It gives you a much more excellent choice of investment opportunities and the potential to profit from price movements in any part of the world.
Flexibility
Commodity futures offer greater flexibility than some other types of investments. For example, you can trade on a short-term or long-term basis, depending on your investment objectives. You can also take a position either for or against the price of a commodity, giving you the potential to profit regardless of which direction the market moves.
24-hour trading
Another advantage of commodity futures is that they can be traded 24 hours a day. This means you’re not constrained by traditional stock market opening times and can take advantage of opportunities as they arise – no matter what time it is where you are in the world.
Leverage
When you trade commodity futures, you have the opportunity to use leverage to magnify your profits – or losses. It means you can control a more significant amount of commodities than if you were buying them outright, with a smaller amount of capital. However, it’s important to remember that leverage can work both ways and magnify losses and profits. But make sure to read up first on what does leverage mean in forex.
Tax advantages
There are many tax advantages to trading commodity futures in the UK. For example, profits from commodities are currently exempt from the capital gains tax, and it means you can keep more of your profits than other investments where you may be liable for this tax.
Efficient trading
Commodity futures offer a more efficient way of trading than some other methods, such as buying and selling actual physical commodities. You’re not required to take ownership of the underlying asset – you’re simply speculating on the future price movements – and therefore you are free of the responsibility that comes with asset ownership, such as transport or storage, for commodities like barrels of oil or bars of gold.
Expert advice
When you trade commodity futures, you are likely to have access to expert advice and support from your broker. It can be beneficial, especially if you’re new to this investing. They can help you understand the market and decide which contracts to trade, and they can also help you manage your assets for a small fee if necessary.
Online trading
Commodity futures can be traded online, which means you can do it from the comfort of your own home. All you should need is a computer and internet connection, and it makes it a convenient way to trade, as you don’t need to travel to a physical location.
Regulated market
When you trade commodity futures, you’re doing so in a regulated market. It offers more excellent protection than other investments, such as cryptocurrencies, which are not regulated in the UK. It also means more transparency and accountability, which can help reduce the risks involved.
Conclusion
These are just some of the many advantages of trading a commodity futures contract. If you’re looking for a way to diversify your investment portfolio, this could be the perfect option. With the potential to profit from price movements in any part of the world, and the flexibility to trade on a short or long-term basis, there are plenty of reasons to try.