In the last four years, futures trading in commodities has emerged as a major investment option in India.
These days, commodity market performance is equal to that of the stock market and analysts predict that the commodities market will overtake the capital market in trade volumes sooner than later.
But since commodities futures market is a relatively new entrant in India, not many investors know how to tap and benefit from trading in various commodities.
Here are 10 steps that you need to know to invest in commodities market.
Step 1: Locate a brokerage house with a reputation for service.
Step 2: Fill a demat account opening form with a registered brokerage house and a member with the national commodity exchanges. You could require PAN card, address proof and passport size photos.
Step 3: Be clear of the rules and regulations especially transaction costs.
Step 4: Choose the right brokerage plan that optimises your costs, brokerage fees ranging from 0.03% to 0.08% on contract value.
Step 5: Be clear of the service deliverables from your broker.
Step 6: Insist on regular reports and special knowledge/training opportunities.
Step 7: Set aside funds for commodity investing, but remember not at the cost of other traditional investing avenues.
Step 8: Focus on a few commodities, gather requisite knowledge and pay up the initial amount for margin money, account opening charges and annual maintenance charges.
Step 9: Clear any or all doubts now set stop loss and book profit levels.
Step 10: Get ready for investing and track your success and losses all the time.
