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Indexes and Futures Guide

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A Guide to Indexes and Futures

by John Mussi

Many people think that investing in the stock market means that you're going to either be buying stocks or bonds... after all, those are the more well-known types of investment, and it stands to reason that some people would think that they were the only types available.

Other investment alternatives exist, however... depending upon the type of investment that you're wanting to make, indexes or futures might serve your purposes better than stocks or bonds.

Below, you'll find basic information on both indexes and futures, as well as information on making investments into both of these types of investment opportunities.

Defining Indexes

If you're not familiar with the term, investing in an index might seem a bit odd to you. All that an index is, though, is a basic category in an industry or type of trade... goods such as gold, diamonds, and even technology can have indexes traded on them, and as the industry improves so does the value of the index.

A decline in the industry, of course, will bring about a decline in the value of the index.

Investing in Indexes

When deciding whether to invest in an index, you should take several things into consideration. Carefully consider the type of industry that the particular index that you are considering represents, the cost of shares of the index, and even the time of the year... after all, most industries will go up in value near the Christmas season and will stay high through Valentine's Day, but they also may go down slightly in early spring.

By doing all of this you are trying to determine whether the index prices are currently high or low; though most industry indexes will continue to grow slightly over time, most indexes undergo a variety of fluctuations throughout the year.

Buying shares in an index while it's low will help to make sure that you continue to make money in the years to come as the index grows in value.

Defining Futures

Whereas indexes deal in the current average values of various industries, futures are based upon the potential performance of certain commodities and agricultural products.

Trading in futures means that you make an agreement to purchase a certain amount of the commodity at a certain price on a future date... this investment can be to your advantage if the price of that commodity goes up significantly before that date, but can cause you problems should the price fall before then.

Investing in Futures

Care should be taken when investing in futures... while it is a good opportunity for making money through investment, carelessly buying in futures can result in the loss of quite a bit of your hard-earned money. Before deciding to make a purchase order, take the time to research the commodity that you're considering purchasing and educate yourself in trends in the trading of that particular commodity.

You should also remember that various factors can influence commodities, especially those dealing with livestock and agriculture... droughts, floods, and even strikes or labor disputes can drive prices up which likely will result in you making more money than you paid for the purchase.

You should pay attention to all of these factors, as well as the advice of respected financial advice sites and investment brokers, and use care when deciding to invest in futures.

There is a great opportunity for making money in futures, but there can also be considerable risk.

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About The Author: John Mussi is the founder of Direct Online Loans who help homeowners find the best available loans via the website.