There are some people who do not really know what makes Futures trading different from Shares of Stocks trading.
There are many who have stock accounts and like to buy and sell shares for a profit. The truth is, some think that the Futures is better than the Stocks as it has more advantages. Here are some of the differences between the two and it is up to you to figure out which one is best suited to your personality and goals.
- Shares of stocks are generally considered as capital gains, this means that you are going to be required to pay the Capital Gains tax which will depend greatly on the length of time that you hold it. Futures on the other hand are considered as short term capital gains even if the holding period is long term. This means that 60% of the gains are considered long term while the 40% is considered short term.
- A portfolio that is solely based on futures alone or shares of stocks alone performs less than when it is a balanced portfolio of shares of stocks and futures.
- Futures trading is less open to manipulation and rigging as the trade is too fast and is based on information which is highly secured. There are more inside information trading done in shares of stock than there is in futures.
- Shares of stocks are considered an investment while Futures Trading is not. Futures are based on speculation dependent on the political and economic atmosphere which may affect the goods that are being traded.
- Trading in futures is technically no different from trading in stocks. The odds of making a right or wrong decision are similar if not the same. However, because there are lower margins involved in futures, traders make more money out of trading in stocks.