Investing

Investing is holding an asset for a longer term, expecting it to increase in value. The most common example is investing in equity mutual funds through a retirement plan. Many of these funds are held for years and are expected to show a substantial appreciation over long term.

You can also invest in individual stocks and hold them for 6 to 18 months or longer, sometimes much longer. This is referred to as "buy and hold" strategy.

This is because futures contracts are highly leveraged. Margins (the deposit required) on futures contracts are much less than for stocks, as low as 3% on some futures contracts compared with up to 50% for stocks. As well, futures investors are not charged interest on difference between margin and full contract value.

The margins for futures contracts act more as a performance bond or good faith deposit whereas margin for stocks is more of a loan.

Although margin on futures contracts is quite small, it rides full value of underlying contract as that contract rises or falls, thus providing leverage mentioned earlier.

Commissions charged by futures brokerages are normally much less than brokerage commissions for other investments.

Futures markets use open outcry (auction type) method of trading ensuring very public, fair, and efficient markets. Plus, it is much harder to trade on inside information as so many variables affect markets. Also, futures markets are very liquid. Transactions can be completed quickly, which lowers risk of adverse market moves

If you own stocks you are an owner of company. This allows you to share in company’s profits, and losses, through dividends, and increases or decreases in stock’s value. It also gives you certain voting rights with company. However, a company can go bankrupt, leaving you holding worthless stock.