How does one invest in commodities, such as through futures contracts or exchange-traded funds (ETFs)?

In India, one can invest in commodities through futures contracts and exchangetraded funds (ETFs). Here are some details on each:

1. Futures Contracts: Investors can trade in commodity futures contracts through commodity exchanges such as Multi Commodity Exchange (MCX) and National Commodity and Derivatives Exchange (NCDEX) in India. Futures contracts are agreements to buy or sell a specific commodity at a specific price and date in the future. Futures contracts offer a high leverage, which means that a small amount of margin can control a larger amount of the underlying commodity.

2. Exchangetraded funds (ETFs): Investors can also invest in commodities through ETFs that track the price of specific commodities or commodity indices. ETFs are similar to mutual funds, but they trade on the stock exchange like a stock. In India, some examples of commodity ETFs include the Reliance ETF Gold BeES, Kotak Gold ETF, and SBI ETF Gold.

It is important to note that investing in commodities can be riskier than other asset classes due to their volatile nature. It is essential to do thorough research and understand the fundamentals of the commodity before investing. It is also important to consider factors like geopolitical events, government policies, and weather patterns that can impact the commodity's price.