What is the difference between Equity and Commodity? | Equity vs Commodity in Zerodha
When I started my journey in the stock market, even I was not sure of a few terminologies related to this new world 10 years back. But with time, experience, & determination we can excel in any field. Our sole motto is to advise you how you can make maximum profits so you should know these terms and their key difference with other terms. In this series, we will discuss Equity vs Commodity Zerodha or What is Equity and Commodity in Zerodha?
What is Equity and Commodity?
Let’s start understanding both terms one by one then we will get into the key difference. On Zerodha, to trade in Equity and Commodity these are two segments of trading. Therefore, in case you want to trade in Equity and commodity both then while opening the account you need to tick the segments you have an interest in trading. At a later point in time also you can choose the commodity segment by paying Rs.100 extra.
Well, Equity and commodity are both asset classes. We use both terms interchangeably while parking money for investment purposes or price trading. Most importantly, the investment horizon can vary as per the investor’s need. SEBI regulates both the platform and brings buyer/seller on the neutral platform for fair price discovery. To invest in either market type, you need to follow a fundamental & technical approach. If you want to trade in both asset classes then you need to use different types of exchanges in India. In India, to invest in stocks using NSE and BSE whereas for commodities use MCX or NCDEX.
It is very difficult to say which asset class is better to invest in since it depends on the intent of the investor. Generally, if you looking to invest in the short term and trying to lock the prices for the future then the commodity market works for you. However, when you looking for a long-term horizon and want liquidity at the same time then it’s wise to invest in the Equity market.
Now let’s cover the key difference between both asset classes.
Equity vs Commodity in Zerodha
Here are the key differences between Equity and Commodity:
|Nature of Product||Equity refers to investment in the form of capital that is invested in a firm to acquire ownership or representation||The commodity is the basic raw material on which traders or speculators take a position to discover the future price|
|Investment Horizon||Equity investment is considered a long-term investment for growing your profit over time with emerging businesses.||Whereas commodity trading is used as a hedging tool to limit the loss or book quick profits on bets.|
|Trading Platform||Equity gets traded on NSE & BSE.||On the other hand, commodities get traded on MCX & NCDEX.|
|Mechanism of Trade||You can trade-in equity via equity intraday, equity futures/options but mostly like to take delivery of the stock for stable returns.||Commodities are traded mostly by options and futures contracts to book quick gains.|
|Timeline||Equity stocks are listed on exchanges for a long period so you can grow with a company going through different economic cycles.||Basically, commodities are traded as contracts hence come with an expiry date post which becomes useless.|
Hope you have a clear understanding of Equity and Commodity trading in India on the Zerodha platform. To trade on Zerodha for both segment functionalities remain the same for buying or selling. However, you need to separately add funds in both segments as two different entities take care of these two segments. Nor you can transfer funds from one segment to another so be sure how much you want to trade from both markets.
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