Two Reasons Why Futures Trading Can Save Your Business Money
Futures is a trading option that allows you to purchase or sell futures contracts on both stocks and commodities. Since it is considered one of the easiest types of trading practices to comprehend, a lot of people use this method as an introduction into the world of trading. While this is true, it’s also important to mention that futures trading also comes along with a number of financial benefits. If you’re a business owner looking to start investing, here are two ways futures trading can save your business money.
When compared to trading options like Forex or equities, futures trading comes with a much lower initial investment. Key to any business organization remaining successful is keeping the amount of capital they have access to, as high as possible.
With that being said, it’s best to shy away from investments that come with high initial costs that can virtually deplete your capital funds.
Futures trading allows you to jump into the trading league without a ton of capital, upfront. A lower investment threshold not only keeps your risks lower, but this also helps keep your profit potential higher, which is the ultimate goal. It’s also worth noting that since futures trading doesn’t require the same amount of labor and effort as traditional trading practices, the commission fees charged by your broker will likely by lower as well.
Save on Taxes
With traditional trading practices, all the capital gains you earn are taxed at a set and standard short-term rate throughout the life of the transaction, no matter how long this period is. However, futures trading affords you the opportunity to benefit from a short-term tax rate and a long-term tax rate. The benefit of having dual tax options is that long-term tax rates are always lower than short-term rates, which can save you money over the life of the transaction.
Instead of paying the same amount throughout the life of the transaction, with futures trading your capital gain tax rate will eventually decrease to a lower amount. A lower tax obligation translates into greater profits. You can discuss your specific tax percentage with your broker to see just how much you can potentially save.
If you are considering investing funds from your business in futures trading, it’s a good idea to speak with a commodities futures broker. A broker can help analyze your goals and help you formulate the best training plan to reach these goals. Have more questions? Contact a company like SJB Futures, with any other questions you might have.