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Due to its demand, cotton has a large and fairly stable presence on the stock market, making it a favourite for investors. You can buy or sell an interest in cotton through a variety of investment vehicles.
Instead of investing in the stock of one or two companies, exchange traded funds (ETFs) give you the option of placing your money with a bundle of assets.
ETFs are a simpler way of entering the market. While they work much like regular stocks, ETFs are protected from market movements through diversification — they don’t rely on the performance of one company.
If you are still learning the basics of investing, then ETFs are a great introduction. Cotton is a massive industry that’s been around for a long time, so it may be a good place to start. Here are a few options to consider:
Stocks are a common option for investors, taking back the control you lose when investing in ETFs while also remaining less risky than futures. While stocks run a comfortable middle ground between the other options, they are still vulnerable to market movements and should be approached with a bit of market knowledge.
Cotton is a massive industry and will continue to be as long as we choose to wear clothes. There are plenty of brokerages offering a selection of company stocks for you to choose from, and with its prevalence, cotton may be a good place to start. Here are some of the biggest names in the industry:
Futures are one of the riskier methods of investing, and while they can be very profitable, they can just as easily lose you a lot of money. Futures trading is more commonly the domain of cotton farmers or manufacturers, though investors and speculators can also buy and sell futures contracts through select brokerage accounts. Only a few mainstream brokerage accounts allow futures trading alongside stocks, ETFs and options.
By investing in futures, you are agreeing to buy a commodity at an agreed price to receive directly at a later date. If the price you agree to buy at ends up being lower than the price of the commodity when you receive it, you will have made a solid return; however, the market may go against you and you could end up paying more than necessary.
Futures operate on both buyer knowledge and luck. If you are new to investing, it is recommended you learn the ropes before considering futures as an option.
Cotton is an in-demand staple you can invest in by purchasing stocks, futures and ETFs. But keep an eye out for shifts in competing industries and commodities that could impact the market.
Explore your investing options across trading platforms and commodities before you make a decision.
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