2. Where on the risk/return spectrum to commodities fall on?
3. Why do investors choose commodities and why do others shy away?
1. It's an auction, very similar to the stock market, except you're betting on the change in price of the underlying commodity rather than owning something. The biggest difference is that commodities are heavily leveraged.
Definition of 'Leverage'
http://www.investopedia.com/terms/l/leve...
2. If you take a beginner finance course, Econ 101, you would learn that money market instruments and bank deposits are safest, followed by bonds, then stocks. Finally, commodities and options and forex are at the far right of the spectrum. Commodities are about as risky as it gets.
3. Some people use commodities to diversify, others to hedge or simply speculate. People shy away because of the high risk; not many people can hold a leveraged position, but mainly because of lack of knowledge and understanding. It is not generally a place for "investors", but rather a trading arena requiring advanced trading skills.
1. How fo commodities markets operate
2. Where on the risk/return spectrum to commodities fall on?
3. Why do investors choose commodities and why do others shy away?
