Commodity Pool

Reviewed by Vineeth | Updated on Sep 28, 2020

Catalogue

Introduction

A commodity pool is an investment structure that is private in nature, and it combines investments made by investors to purchase securities in the commodities and futures markets. The commodity pool is also referred to as the commodity pool, and it is utilised as a single entity in order to get leverage in trading in anticipation of optimising the profit potential.

The term ‘commodity pool’ is a legal term which is set under the National Futures Association (NFA). The commodity pools may be regulated by a different entity apart from the country’s securities market regulator.

For instance, in the United States of America (USA), the Commodity Futures Trading Commission (CFTC) is the regulator of the commodity pools.

ETFs

A simplified process for retail investors to get access to the market is through trading exchange-traded funds (ETFs). These are comparable with mutual funds and come with much lower costs. Commodity pool ETFs can be considered a kind of commodity pool in which investors combine finances from various investors to get access to the commodity and futures markets.

ETFs have been on the booming trend of late as they have attracted the customers by allowing them to be flexible in the way they go about their investments. Also, the fact that ETFs are of lower expenses as compared to mutual funds has made them a great investment option.

Pros

The main advantage of investing in commodity pool is that you are going to join the pool of several investors with similar investment objectives, and thereby increasing your purchasing power. It is always beneficial to have a larger purchasing power.

For instance, having a purchasing power of Rs 1 lakh is way better than having a purchasing power of a mere Rs 10,000. Commodity pools are structured in a way that the investors get the tax benefits.

Related Terms

  • Clearing Corporation of India Limited (CCIL)

    The Clearing Corporation of India Ltd was established in April 2001 to render guaranteed clearing and settlement functions concerning transactions in G-Secs, money, derivative markets, and foreign exchange.   Read more


  • Beneficial Owner

    A beneficial owner is an individual who gets to enjoy ownership benefits even though the title to some form of the property is in the name of another individual.   Read more


  • Market Depth

    Market complexity is the ability of the market to maintain relatively large market orders, without affecting the security price.   Read more


  • Relative Strength

    Relative strength is a calculation of the price trend of a stock or a financial instrument in comparison to another instrument, stock, or industry.   Read more


  • Ulcer Index (UI)

    The Ulcer Index (UI) is an indicator that calculates downside risk in terms of price declines both in magnitude and length.   Read more


  • Fund Flow

    Fund flow is the sum of all cash inflows/outflows from and into different financial assets.   Read more


Recent Terms