Wednesday, January 23, 2008

Futures Investment

If you are thinking seriously of venturing into a business of your own, then investing in commodities or futures is a great idea.Commodities or futures investment is a form of business opportunity for unemployed, home maker, retiree, student and those who want to have a second income.Many people have become very rich when it comes to investing in futures. It is one of a few investment vehicles where an individual with a limited capital can acquire profits in a relatively short time.Due to the fact that many investors lose their money, probably about 80% of them,the reputation for commodity trading investment has a bad reputation.Futures trading is only risky if you want it to be risky. If you treat your investment as a business,instead of a casino, the risk can be kept to a minimum level and the returns are excellent.

What are commodities?

The history of commodity trading originated back to Japan in the 18th Century. The commodities involved were rice and silk. In US, the trading of commodity started in 1850s with the introduction of cotton, corn and wheat.Commodities are the actual physical products such as corn, palm oil and oil. Futures , as in stocks and equities in stock market, are the contract of the commodities.The process of trading of commodities is known as futures trading.When you trade futures you do not own the commodities, instead you own the contract for a limited period of time. You are actually speculating or forecasting on the future price of the commodity. Contract is an agreement by two parties who agree to transact physical commodities for delivary at a particulr price at a later date.

In Malysia, if you are to trade futures, say CPO ( Crude Palm Oil), you would have to trade it in Bursa Malaysia, just like CBOT in US. Firstly, you have to have an account open with a sufficient cash deposit with a brokerage firm. Secondly, you can place an order either to buy or sell through a broker in the brokerage firm. Any transaction which incurs profits or loses will have to borne by you.Before involving yourself in a futures investment, you have to educate yourself with a good understanding of the market and the strategies adopted. You can place a position at what level that may interest you but if you fail, you may have to take delivary of truckload of crude palm oil to your house.

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