Product market research: which assets do you need to know about?
Trading on commodity exchanges is the main source of income for millions of people. And in this area you can really succeed, the main thing is the right approach. You must regularly read product market research and analysis, develop your own strategy and strictly adhere to it. However, if you are a beginner and are just about to start investing, you should be familiar with the basic terms and types of assets.
Product market research: what you need to know before you start to invest
First of all, you need to understand the concept of a derivative – it is a tool whose price is calculated based on the value of the investee. They are divided into two basic types – exchange or over-the-counter. In most cases, trading is carried out using clearing houses. In some cases, a trading counterparty is also involved, which acts as an intermediary.
The main derivatives in stock trading are futures contracts. This is the main way to make investments in commodities. They are provided with tangible assets. In addition, there are other types of derivatives, such as swaps, as well as forward contracts. You can buy futures for any assets only on the exchange. As for over-the-counter trading, here the parties enter into a contract, the terms of which are discussed exclusively between the companies (possibly with the involvement of an intermediary).
You should also talk about exchange-traded funds. They first appeared in 2003 and offered users to work with electronic gold. If the investor invested in this asset, he did not receive ownership of the ingots. There are obvious advantages to this. In particular, when making investments there is no need to pay additional insurance premiums, and also to rent a place in the vault in order to keep bars in it. Exchange-traded funds allow investors to make transactions in the precious metal, eliminating the risks of volatility that are inevitable with actual possession of the goods.
Commodity Funds – are the means for making investments in various commodity assets. It is they who track the performance index of certain goods. The first asset that could be purchased with such a fund was gold, which we described above. Then other valuable metals were added, such as silver, platinum, and palladium. At the initial stages of their development, exchange-traded funds are actually owned physical assets, but over time, organizations abandoned this and introduced futures contracts.
What products can you invest in the stock exchange? In fact, a huge amount of options. The most demanded raw materials at the auctions are energy products. In second place is the commodity class of electrical equipment and electronics. The third – equipment for the production of electricity, for example, boilers or nuclear reactors.
The category of energy products primarily includes crude oil. Its most popular brands are Brent and WTI. Such investment assets as natural gas, fuel oil for thermal power plants and ethyl alcohol (ethanol) are also quite common.
