Risk is a part of trading and investments. But some investments have fewer risks and some have larger risks.
- Equity: The fraction of the privilege of a company issued to the common public with capital. Whenever you buy the equity of a company, you become the owner of that company. Investing in the Equity market is not a risky option, as it is not very volatile, and has a pace of changes.
- Commodity: Commodity refers to the general products or goods, like cotton, metals, black pepper, salt, etc. They are used as an investment for profit. Investing in the commodity market is a risky choice, as the market is highly volatile. And being used to drastic fluctuations carries a lot of financial risks.
Every company has fractions of equity, one who invests in these equities will hold ownership rights on that company. For example, Reliance has equity of 100 crores (2% of reliance)and Ram bought the equity, he became an owner of the company. Most of the company needs to allot their equity to several investors to raise an amount of capital. If the company faces loss, the owner will also face the same.
The commodity is the basic goods and products used in everyday life like cotton, black pepper, salt, Cement, etc. They can be expensive things like Gold, Silver, Platinum, Diamond, etc. They are a major source of investment. Most of the common people invest in commodities due to the risk of loss. There is almost a 0% chance of loss in investment in commodities.
Equity Vs Commodity: Major Differences
|Duration||Equity can be bought anytime and kept for years or decades, you can sell them anytime.||Commodities can be kept for a month only. After a month their value goes to zero.|
|Volatile||Equity markets are less volatile.||Commodity markets are highly volatile.|
|Risk||Equity has less risk of loss and fraud due to proper documentation.||Commodities have a higher risk of market loss and fraud.|
|Benefits||Equity investors will enjoy several benefits including Dividends, Bonus Shares, Voting Rights, etc||the commodity investors will not enjoy any of the rights..|
|Time Conditions||Equity has no expiration time limit. One can hold them for years or decades without any expiry date.||The commodity expires within a month.|
|Margins||Equity has low margins, one can’t earn the optimum profit from equity ownership.||The commodity has high margins, one can expect high profit from them.|
|Trading Hours||The trading time for equities is between 9:15 am to 3:30 pm from Monday to Friday.||The trading time for commodities like precious metals is between 9.00 am to 11.30 pm from Monday to Friday.|
Equity is the most preferred way of investing in the Share market. However, investors can buy the stock or equity via online platforms or from the brokers. While on the other hand, the commodity market is based on auctions and options.
Frequently Asked Questions
Who can invest in equity and commodities?
Both of them are made by the general public. Anyone with the sum of money can invest.
Is it riskier to invest in Equity than a commodity?
No, Equity has a lower risk than a commodity.
What is Equity?
A fraction of the ownership of a company that can be bought with capital by the general public is known as equity.