How to invest in cotton

A guide to investing in cotton, one of the world's most traded commodities.

Ways to invest in cotton How you can invest
Compare trading platforms Compare features
Best for 0% commission stocks
eToro Free Stocks logo
Finder Award
Go to site
Capital at risk. Fees apply.
Copy picks from top traders
4.3 ★★★★★
Commission-free trades
Fractional shares
Get dividend payments
Best for fractional shares
XTB logo
Go to site
Capital at risk. T&Cs apply.
Earn 4.75% on uninvested funds
4.4 ★★★★★
Commission-free trades
Fractional shares
5,400+ stocks/ETFs
Best for US shares
CMC Invest share dealing account logo
Finder Award
Go to site
Capital at risk. T&Cs apply.
Try Plus free for 3 months
4.4 ★★★★★
Commission-free trades
3,000+ stocks
Real-time live pricing

Cotton makes up around half of the fibre used in the production of our clothes and other fabrics. 20 million tonnes is harvested and traded each year; for comparison, that is around 20 t-shirts for each human being annually.

Due to its demand cotton has a large and fairly stable presence on the stock market making it a favourite for investors. Find out the different investment methods to invest in cotton and the risks involved.

Invest in cotton ETFs

Instead of investing in the stock of one or two companies, ETFs give you the option of placing your money with a bundle of assets. You can learn more about ETFs here.

ETFs are a simpler way of entering the market. While they work much like regular stocks ETFs are protected somewhat from market movements because 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 with a number of companies offering ETFs, so it may be a good place to start.

Pros

  • By bundling stocks from different companies together ETFs give you access to a larger part of the industry.
  • ETFs are considered by some to be the safest choice for investors.

Cons

  • Because you are investing in a collection of stocks you lose some of the control you might have had with a single company’s stock.

Buy cotton ETFs

Invest in cotton futures

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.

By investing in futures you are agreeing to buy a commodity at an agreed price to receive 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 be 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.

Pros

  • Investing in futures gives you complete ownership over a commodity.
  • If you make the right investment futures can bring you solid returns.

Cons

  • There is a real element of gambling present in futures, and you can end up paying dearly for a mistake.
  • Futures expire if they aren’t used within a certain period of time, becoming worthless.

Buy cotton futures

Invest in cotton stocks and shares

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 brokers offering a selection of company stocks for you to choose from, and with its prevalence cotton may be a good place to start.

Pros

  • A range of company stocks to choose from.
  • Withdraw from the market whenever you want.
  • Stable and conventional approach to investing.
  • Investment control.

Cons

  • While futures are certainly more dangerous, stocks still have their risks. Market fluctuations are unavoidable and can have a real impact on your investment.

Buy cotton companies shares

How much is cotton worth?

Reasons to invest

  • As worldwide energy consumption rises, and resources such as fossil fuels decline, the demand for sustainable, renewable energy sources is growing rapidly.
  • The world is becoming more environmentally conscious, renewables can be an ethical investment.
  • As the technology behind renewable energy production advances, renewable resources are becoming more efficient, reliable and lower in cost.

Is cotton a safe investment?

  • Stockpiles: Countries hoarding cotton can influence prices if they decide to withhold their stockpiles during a shortage or put them on the market when there is no domestic demand.
  • Subsidies: Policies to keep prices low and supply high can be altered over time, influencing prices both positively and negatively.
  • Substitutes: Synthetic materials such as polyester can undercut the price of cotton and weaken its market share. Large but struggling economies can drastically influence prices if they switch to a cheaper material.
  • Environment: Weather shifts will influence pollination, growth and yield, subsequently impacting supply.
  • External influences: Other industries can have an influence on cotton prices. If oil becomes more expensive, the harvesting and production costs for cotton can rise as a result. It is a good idea to keep an eye on relevant industries.

Compare these providers for access to cotton ETFs and more

Table: sorted by promoted deals first
Product UKFST Finder Score Min. initial deposit Price per trade Frequent trader rate Platform fees Offer Link
eToro Free Stocks
Finder AwardFree Trades
eToro logo
Finder score
$100
£0 on stocks
N/A
£0
Go to site

Capital at risk. Fees apply.

Platform details
XTB
Free Trades
XTB logo
Finder score
£0
£0
£0
£0
Earn up to 4.75% interest on uninvested cash.
Go to site

Capital at risk

Platform details
Finder score
£1
£11.95
£5.95
£0 (0.45% for funds)
Go to site

Capital at risk

Platform details
Finder score
£0
£3.99 (free regular investing)
£0
From £4.99 a month
Pay no account fee for 6 months when you open an ii Trading Account. Offer ends 31 December. Capital at risk. Terms & trading fees apply. New customers only.
Go to site

Capital at risk

Platform details
Finder score
£0
£3
N/A
0.12% per year
Limited time offer: Zero commission on 100 US stocks for new customers. T&Cs apply.
Go to site

Capital at risk

Platform details
Finder score
£0
£0
N/A
£0
Get your first 3 months free when you upgrade to Plus plan. T&Cs apply. Capital at risk.
Go to site

Capital at risk

Platform details
Freetrade
Free TradesOffer
Freetrade logo
Finder score
£1
£0
N/A
£0
Get a free share worth up to £100 when you sign up and deposit at least £50. T&Cs apply. Capital at risk.
Go to site

Capital at risk

Platform details
loading

All investing should be regarded as longer term. The value of your investments can go up and down, and you may get back less than you invest. Past performance is no guarantee of future results. If you’re not sure which investments are right for you, please seek out a financial adviser. Capital at risk.


Frequently asked questions

Zoe Stabler DipFA's headshot
Senior writer

Zoe was a senior writer at Finder specialising in investment and banking, and during this time, she joined the Women in FinTech Powerlist 2022. She is currently a senior money writer at Be Clever With Your Cash. Zoe has a BA in English literature and a Diploma for Financial Advisers. She has several years of experience in writing about all things personal finance. Zoe has a particular love for spreadsheets, having also worked as a management accountant. In her spare time, you’ll find Zoe skating at her local ice rink. See full bio

Zoe's expertise
Zoe has written 163 Finder guides across topics including:
  • Share dealing
  • Reviews and comparisons of trading platforms
  • Robo-advisors
  • Pensions
  • Banking

More guides on Finder

  • How to invest in soybeans

    Soybeans are a popular commodity to invest in. Usually you would invest in soybeans with futures, but you can also invest in futures options and exchange-traded funds (ETFs).

  • How to invest in oil

    Learn where to invest in oil, about oil’s historical performance as an investment and the risks that come with it.

  • Investing in cocoa: A how to guide

    Ever thought about investing in cocoa? Here’s a guide to the different investments options at your disposal, the benefits of investing in cocoa and what the possible risks.

  • How to invest in coffee

    Coffee is one of the most highly traded commodities in the world. As well as having enormous cultural value, investors often look to coffee as a way of diversifying their portfolio. Our guide explains how you can invest, and some of the considerations to take into account.

  • How to invest in sugar

    Learn about investing in sugar; the options available, the different markets and the factors driving the price of the commodity.

Go to site