Monday, 26 October 2015

An Insight on Futures vs Stocks

An Insight on Futures vs Stocks
Stocks and Futures are two different types of investments. In stocks the ownership of a company is obtained on purchasing the stocks. The larger the number of stocks the greater the ownership of the company is obtained. If the value of the company increases, the value of the stock also increases. The investors can cash out their stocks by selling it to some other investors. The prices of the stocks changes based on the principles of demand and supply also. The more the demand of the stock the more will be its prices. Similarly when the demand of the stock goes down the prices also goes down.

The futures are a different type of investment. In this case the there is no grant of ownership to the buyer. Instead in case of Futures there is an agreement to buy or sell a particular entity on a future date. In futures both the commodities like wheat or stocks of different companies can be purchased or sold. In Futures a single stock or a basket of stocks can be purchased or sold.  In futures contract on maturity the buyer does not physically bring the commodity to home. Suppose a trader has bought the futures of corn on a particular future Date, on maturity of the period of future does on bring the physical corn to his home. Instead he will sell the commodity before the expiry period and book the profit. Thus if the prices of the corn commodity increases after buying the contract the trader can sell the contract on a future date and can book profit. On the other hand if the prices of the corn commodity go down he will incur a loss in the future date.

Thus there is a lot of difference between the two types of investment, the stocks and the futures. In order to do the trading in the stocks and futures beneficially one can contact advisory firms for their support. These advisory firms provide accurate stock market tips and futures tips.

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