Commodity Investment - How to Invest in Commodities

Mehul Kothari द्वारा पोस्ट | 23 Aug 2019 को प्रकाशित |
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Commodity Investment - How to Invest in Commodities

Have you ever thought about how the various goods and products come into existence? What goes into their manufacturing? Every product or good we use is made up of some of the other commodity. Commodities are the raw materials that are used to produce or manufacture other products. Commodities are of various types like agricultural commodities, energy, metals, etc.


The prices of commodities keep changing which affect the price of end products as well. Like for example, rising Brent crude prices will lead to an increase in the prices of petrol and diesel. Since the prices of the commodities keep changing you can consider trading in them and take advantage of the price volatility. In this article, you will learn about how to invest in commodities, the best commodities to invest in and everything related to it.


But before learning how to invest in commodities, let us learn where you can trade in the commodity market.


Where Can YouTrade in The Commodity Market

Investment in the commodities market in India can be done through the commodity trading exchanges. At present, there are three commodity trading exchanges in India, they are as follows:

  • National Commodity and Derivatives Exchange Ltd. – NCDEX
  • Multi Commodity Exchange of India Ltd. – MCX
  • Indian Commodity Exchange Ltd. – ICEX

Out of the above mentioned exchanges, MCX and NCDEX are the most popular among the traders. If you want to trade in the commodities like metal, energy, etc., you can trade through MCX and if you want to trade in agricultural commodities, you can trade through NCDEX. ICEX is known for trading in Diamond.

The commodities in India can be classified into three major categories. They are as follows:

  • Agriculture – Maize, Soya, Spices, Pulses, Fibres, Rice, Wheat, Guar, Castor, etc.
  • Metals – Gold, Silver, Platinum, Aluminium, Copper, Lead, Nickel, Zinc, Steel, etc.
  • Energy – Crude oil, Natural gas, etc.

The above mentioned are the exchanges and types of commodities where you can invest your money. Let us now learn how to invest in commodities.


How To Invest In Commodities In India

The beginners entering the market always have the question in their mind,“how to invest in commodities in India?” In this section of the article, you will learn about the various ways through which you can make an investment in commodities.

  • Invest In Physical Commodities

The easiest way to invest money in the commodity market is by physically purchasing it. The purchase is made in the hope that the price of the commodity will rise and you will be able to sell it at a higher price. One of the best commodities to invest in India and hold it physically are precious metals like gold, silver, etc.

  • Invest In Commodity Futures Market

Futures contract allow the trader to buy or sell a commodity at a set date and at a set time through contracts. The futures contracts trading is for those people who want to play with the volatility of the commodity prices and make massive gains.

  • Investment in Commodity Related Stocks

To avoid the risks of future trading, you can purchase the shares of companies related to commodities. By investing in such stocks, you can take advantage of the commodity price movement and enjoy the returns in the form of price appreciation of the share price.

  • Invest In Exchange Traded Funds

Exchange Traded Funds (ETFs) are the funds that comprise of future contract and allow you to invest in them directly. ETFs can be traded just like stocks and you can hold them without the risk of holding any futures contracts.

  • Invest in Mutual Funds

No one in the market can tell you what a good time to invest in commodities is. To overcome this problem, you can start a systematic investment plan (SIP) in those mutual funds that deal in commodity related stocks.

To invest in the commodity market through any of the commodity exchanges you need to open an account with the broker. In this section of the article, you will learn about how to open a commodity account.


How to Open a Commodity Account

  • The first step towards investing in the commodity market in India is opening an account with a exchange registered broker. The selection of the broker must be done with utmost care. Take the feedback from the people about their services and credibility. Select the broker that gives you the best services at the most affordable rates.
  • The next step is to fill the account opening form with the commodity broker. Along with the form, submit the copies of necessary documents that are needed to open an account. The documents include PAN card, address proof, ID proof, income statement and cancelled cheque.
  • After submission of the documents, the broker will carry out verification of the information submitted by you. On successful verification of the information, you will be provided with the account number and password.
  • As soon as your commodity trading account is opened, you must deposit the margin money. The margin money is equivalent to 5% to 10% of the contract value.
  • After account opening, you can trade at any of the commodity exchanges. Let us learn about how you can trade on MCX, which is one of the most popular commodity exchanges in India.



Trading on MCX

Just like BSE and NSE provides you with the platform to trade in stocks, similarly, trading in the commodities market can be done on the MCX (Multi Commodity Exchange of India Ltd.). In fact, you can find the best commodities to invest in India on MCX. The MCX broker acts as an intermediary between the commodity exchange and commodity trader. On this exchange, you can trade in metals, energy and agricultural commodities. All you need to do is simply place the order with the broker over the phone or place it online using the mobile application. MCX was earlier regulated by Forward Market Commission (FMC) which later got merged with the Securities and Exchange Board of India (SEBI) in the year 2015.

Commodity trading account is the primary requirement for making an investment in the commodities market. Whether you are a beginner or a seasoned investor looking to open a commodity trading account, you can consider IndiaNivesh Shares and Securities Pvt. Ltd. We advise our customers about the good time to invest in commodities, the best commodities to invest in, etc. Contact us to enjoy our hassle-free services.

 

 


Disclaimer: Investment in securities market / Mutual Funds are subject to market risks, read all the related documents carefully before investing.

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Balanced Mutual Funds – Best Balanced Mutual Funds to invest in 2019

Posted by Mehul Kothari | Published on 22 Aug 2019

Investment in equity and mutual funds have shown incredible growth in the past few years. One can make handsome returns by investing in the stocks and mutual funds schemes. Since mutual fund schemes have a diversified portfolio, it is an ideal investment avenue for investors who want to play safe. There are numerous types of mutual funds and one such type of mutual fund is balanced mutual funds. A balanced mutual fund offers the benefit of diversification by allowing you to invest in multiple asset classes i.e. debt and equity. This combination of investment not only helps you earn short term income but also build long term wealth. In this article, we will walk you through the list of best balanced mutual funds that you may consider investing in. We will also learn the meaning and advantages of investing in balanced mutual funds. Let us first learn the meaning of a balanced mutual fund.What is a Balanced Mutual Fund?A balanced mutual fund is also called hybrid mutual fund. These mutual funds invest its assets in debt instruments and equities to generate good returns and reduce investor’s risk. These mutual funds are good for investors who have a conservative approach and are looking for fixed returns. Balanced mutual funds typically invest 50% to 70% of their portfolio in the stock and the remaining is invested in bonds and other instruments. Before investing in top balanced mutual funds you must be very careful. Below is the list of best balanced mutual funds 2019 that you may consider for investing for long term.List of Best Balanced Mutual Funds 2019Let us now learn the advantage of investing in the top balanced mutual funds.Advantage of Investing In The Top Balanced Mutual FundsThe biggest advantage of top balanced mutual funds schemes is that they offer diversification. The combination of debt and equity makes them less vulnerable and risky to market volatility. The debt part of the fund ensures that the investor will get an assured fixed return while the equity part is for continuous capital appreciation. Therefore, while making an investment in top balanced mutual funds, the investor must consider the combination that is offered in the scheme.  Another benefit of investing in balanced mutual funds is that it offers the benefit of rebalancing. In situations where the equity markets are overvalued as compared to debt markets or otherwise, the fund manager has the freedom to shift between the asset classes. Since mutual funds offer many tax benefits, let us now learn about the tax implications in the case of balanced mutual funds.Tax Implications for Equity-Oriented Balanced FundsThe balanced mutual funds which have an exposure to equity of 65% or more fall under the equity asset class for taxation purpose. For the gains that are booked within a year of the purchase of equity-oriented balanced fund, short term capital gain tax at the rate of 15% is applicable. When these funds are held for long term i.e. more than 12 months, tax at the rate of 10% is applicable on the gains exceeding Rs. 1 lakh. Tax Implications for Debt-Oriented Balanced FundsThe debt-oriented balanced funds are taxable just like any other debt funds. If the debt-oriented balanced funds are held for a period of 36 months or more, long term capital gain tax is applicable. On the other hand, if these funds are sold with short term capital gains, it is taxable at 20% with the benefits of indexation. From the above taxation implications, it is clear that the equity-oriented balanced funds have a tax advantage over the debt funds. Investing in one of the top 5 balanced mutual funds will reap you handsome returns in the long run along with tax benefits. The Bottom LineSince balanced mutual funds invest in both debt and equity, they are an ideal investment option for people looking for the best of both worlds. Investing in balanced mutual funds ensure capital appreciation as well as minimise potential risks. Therefore, retirees and low-risk tolerant investors especially invest in balanced mutual funds. These mutual funds help to fight inflation and generate income to supplement current needs. Whether you are a beginner or a seasoned investor, you can contact IndiaNivesh Ltd. for assistance in investing in the top 5 balanced mutual funds. Disclaimer: Investment in securities market / Mutual Funds are subject to market risks, read all the related documents carefully before investing.

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Mutual Fund Performance - Five ways to measure Mutual Fund Performance

Posted by Mehul Kothari | Published on 18 Sep 2019

Mutual fund investment plans have emerged as a preferred investment choice for a large number of investors in the last few years. Earlier, most of the households invested their savings in traditional investments like FDs, PPFs, and gold. However, the need for better returns from their savings and growing awareness of other investment options, have led investors to move away from traditional investments and explore other options such as mutual funds.What are mutual funds? In simple words, mutual funds are pooled investments from a large number of investors. They collect money from various individuals and entities that have a common investment objective and subsequently invest this pool of money in various stocks, bonds, and other securities. Thus, mutual fund investment plans allow you to distribute your invested money in a large number of securities than you could put in your portfolio. As a mutual fund investor, you hold units that represent a portion of your holdings in the scheme. Why is it advantageous to invest in mutual funds? Mutual fund investment no doubt is one of the smartest investments for almost any investor. Here are a few of its advantages:1. Simple A mutual fund is the simplest way to invest in capital markets for higher returns. If you are a novice but wish to invest in the capital markets, then mutual funds provide you with the simplest platform to invest in a healthy mix of stocks, bonds, and other securities.2. Easily accessible Mutual funds’ investments are easily accessible for all investors and as an investor, you can start investing in mutual funds for an amount as low as Rs. 500. 3. Diverse Mutual funds allow you to diversify your portfolio as you can gain access to different segments of the market through various mutual fund investment plans. Thus, you can invest in a variety of assets, sectors, securities, etc. 4. Professionally managed Mutual fund schemes are professionally managed by fund managers who have the expertise, time and resources and make sound investment decisions based upon the objective of the scheme.As the number of mutual fund schemes available in the markets has increased dramatically, evaluating the performance of mutual funds is of utmost importance to make wise investment choices. If you are wondering which is the best mutual fund to invest right now and how to evaluate the performance of mutual funds, then here is a simple guide for you. Top 5 measures to evaluate the performance of a mutual fund1. Compare performance with an appropriate benchmarkFor every mutual fund, there is a benchmark index to which you can compare the mutual fund performance. If your mutual fund investment is consistently generating higher than the benchmark, then it reflects the ability of the fund manager to manage the portfolio better. The important aspect here is to compare the mutual fund performance with an appropriate benchmark.Even when you are comparing it with different mutual fund schemes always look at the returns of other funds from the same category with a similar investment objective. Comparing the performance of a midcap fund with that of a large-cap fund would be like comparing apples to oranges. Hence, be careful and make relevant comparisons to see the performance of mutual funds. 2. Alpha Alpha of the fund helps measure the performance of the mutual fund on a risk-adjusted basis. Alpha takes into account the volatility of the mutual fund and compares the risk-adjusted performance of the fund to the benchmark. A positive alpha indicates that the fund manager has managed to outperform your mutual fund investments as compared to the benchmark. Similarly, a lower alpha indicates an underperformance of the fund as compared to the benchmark. Thus, the more positive the alpha of a fund, the better it is. 3. BetaApart from the risk associated with the security due to the nature of the asset class, every investment is exposed to a systematic risk which is due to the state of the economy or market in general and is unavoidable.The beta ratio captures this market risk of your investment. A higher beta indicates that the fund will be more volatile than the market. So, if a fund has a beta of 1.15 then it is 15% more volatile than the market. Note: Alpha & Beta both are risk ratios and are crucial means to find out the performance of mutual funds. The two ratios help you to determine the returns generated as compared to the risks undertaken. As an investor, you should look at funds that have a higher alpha and lower beta. 4. Portfolio diversification The advantage of investing through mutual funds is that they help you diversify your portfolio. A well-diversified portfolio helps you to mitigate the risks associated with investing in funds focussed on too few stocks or sectors or asset classes. So, to ensure that you achieve the desired results, you should review the holdings in your mutual fund. You can check the portfolio of your mutual fund by looking at the fund fact sheet. 5. Expense RatioOne of the biggest challenges for mutual funds is the high fees associated with it. Running any mutual fund involves costs that need to be borne by the investor. The expense ratio is the percentage of money spent to pay the salary of the fund manager, his team and other expenses. So, if the expense ratio of a mutual fund is high then it will reduce the overall returns generated by your mutual fund investments. So, while choosing a fund you should also see that the expense ratio is not very high. Here is a list of best mutual funds for 2019 across popular categories you may consider for investing now: The Bottom LineChoosing to invest in mutual fund investment plans is just the start of your journey as an investor. The important aspect of any investment decision is that it helps you achieve your goals within the desired time frame and considers your tolerance to risk. Mutual fund portfolios are tailor-made to meet your unique goals and are one of the best ways to achieve your investment objectives.So, if you want help with your mutual fund investment portfolio or you want to find the best mutual funds to invest now or simply want guidance, you can always seek assistance from a platform like IndiaNivesh. Their experts will help you build a portfolio that’s best suited for you.Disclaimer: Investment in securities market / Mutual Funds are subject to market risks, read all the related documents carefully before investing.

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