Many investors consider themselves to be diversified, if invested in stocks, bonds, real estate, and even in currencies, but nothing in commodities.
When asked the common answers are: commodities are too volatile, will have a truckload of soya beans dumped on my front lawn, nobody can make money from trading commodities, etc. Sure commodity trading deals with a lot of volatility and one reason is margins. Funds required to buy/sell a given commodity, for example – if a commodity trader intends to trade in the cash future, stock future, index future or commodity future, the average margin required is Rs. 1.6–2.5 Lakh for an underlying value of Rs. 8-10 Lakh, which on an average accounts for 20-35 per cent of the underlying – if bet correctly wins handsomely, but if staked wrongly faces the prospect of losing ones shirt.
It is likely that these myths of investing in commodities were created by frustrated commodity....
