Why it's important to understand products and markets before investing

[Cryptomultiplier]

* How do you distinguish and categorize any  token and investment as either a security or a commodity before investing?


While it's important to understand the products and markets before investing, Mostly when it comes to investing in cryptocurrencies, one should be able to distinguish a security from a commodity properly before any investment.
I found out about the 'Howey test', of which consist of four criteria which much be considered before anyone should decide to make a very reasonable investment decision.
 It would help a potential investor determine if an investment option, is a security or It is a commodity before one gets to make the final call on the investment of choice.
 The criteria includes;
* If it involves an investment of money,
* If there's an expectation of profit,
* If there's a common enterprise, and
* If there's a reliance on the effort of others.

The disparity between 'securities' and 'commodities' is made clearly visible with the explanations given below;

(A).
'Securities' are investments such as stocks, mutual funds, bonds, debt, and other interests in the form of shares in companies, governments, or private businesses.
 In a more general sense, the idea of 'Securities' is, financial abstraction, that is what one cannot see, just as stocks or bonds or debts that can't be seen in a physical sense, but it's there.

(B).
'Commodities' on the other hand, is a result of supply and demand in the real world market and basic goods such as wheat, gold, oil and cattle, that is, natural resources, agricultural products, are good examples of Commodities that a potential investor can invest in and make good profit from.
 Commodities can help when we decide to liquidate or withdraw some or all of our Bitcoin or altcoins kept in a wallet, that is, when we want to diversify an existing investment portfolio and are considering investing in physical, tangible assets.
However, it is to note that not all commodities are physical, tangible assets.

* Do you also know that Bitcoin is a commodity?
Under the Commodity Exchange Act (CEA), all
 Virtual currencies, such as Bitcoin, can be considered to be commodities.

Let's discuss!

[0t3p0t]

* If it involves an investment of money,
* If there's an expectation of profit,
* If there's a common enterprise, and
* If there's a reliance on the effort of others.

This is true and for me it is because it is an investment therefore we are expecting something in return. If we are not paying attention with our investments it's just like wasting money in gambling as you only need luck in there but with investments it's different because we need those criterias above to make our business successful.

I can see a lot of investments here in my place that owners do not think about it's importance and then the next time I heard about their business they became bankrupt it is because they do not fully understand what they are doing.

[Alpha Marine]

This argument is not going to end anytime soon and however one may decide to choose (security or commodity), there are still features that contradict both.
To me, the only basis for Bitcoin being a commodity is the fact that it is owned by no particular central entity or institution is a major reason why it cannot be classified as a security. A security should have a centralised institution responsible for growing the worth of the asset. With shares, we know that it's the company the shares are bought with is responsible for increasing the value of the shares. With bitcoin we know no particular institution controls it.

Bitcoin was labelled a commodity but I doubt it is traded in the commodity market (I may be wrong).
I actually don't have an issue with Bitcoin being a commodity or security, the only problem is that if it's classified as one and not the other, the full definition of what Bitcoin is is limited.

[Upgrade00]

While it's important to understand the products and markets before investing, Mostly when it comes to investing in cryptocurrencies, one should be able to distinguish a security from a commodity properly before any investment.

What is a security or a commodity has been a hot topic for crypto enthusiasts from the very early days. Regulatory bodies have long ruled Bitcoin to be a commodity and recently did the same to Ethereum, this means it's not about what we consider an asset to be but what it is defined to be by the authorities. Most people only classify BTC and ETH to be commodities and everything else a security, while a couple of altcoins with their own chains are making their claim to be regarded as a commodity.

If we go back a few steps though, I'll advice anyone investing in crypto to stick to Bitcoin after doing their research.

[Yaqs15]

* How do you distinguish and categorize any  token and investment as either a security or a commodity before investing?


While it's important to understand the products and markets before investing, Mostly when it comes to investing in cryptocurrencies, one should be able to distinguish a security from a commodity properly before any investment.
I found out about the 'Howey test', of which consist of four criteria which much be considered before anyone should decide to make a very reasonable investment decision.
 It would help a potential investor determine if an investment option, is a security or It is a commodity before one gets to make the final call on the investment of choice.
 The criteria includes;
* If it involves an investment of money,
* If there's an expectation of profit,
* If there's a common enterprise, and
* If there's a reliance on the effort of others.

The disparity between 'securities' and 'commodities' is made clearly visible with the explanations given below;

(A).
'Securities' are investments such as stocks, mutual funds, bonds, debt, and other interests in the form of shares in companies, governments, or private businesses.
 In a more general sense, the idea of 'Securities' is, financial abstraction, that is what one cannot see, just as stocks or bonds or debts that can't be seen in a physical sense, but it's there.

(B).
'Commodities' on the other hand, is a result of supply and demand in the real world market and basic goods such as wheat, gold, oil and cattle, that is, natural resources, agricultural products, are good examples of Commodities that a potential investor can invest in and make good profit from.
 Commodities can help when we decide to liquidate or withdraw some or all of our Bitcoin or altcoins kept in a wallet, that is, when we want to diversify an existing investment portfolio and are considering investing in physical, tangible assets.
However, it is to note that not all commodities are physical, tangible assets.

* Do you also know that Bitcoin is a commodity?
Under the Commodity Exchange Act (CEA), all
 Virtual currencies, such as Bitcoin, can be considered to be commodities.

Let's discuss!

Understanding everything that you are doing well even before you start doing it is something that should not be compromised.
When you talk about investment, without better understanding, is rubbish. So, before investing, you will have good knowledge of what investment is all about, the knowledge of the products you want to invest in, also the knowledge of how the market is. By so doing, I think even the risks that might be in the investment will reduce.

[iBaba]

* If it involves an investment of money,
* If there's an expectation of profit,
* If there's a common enterprise, and
* If there's a reliance on the effort of others.

This is true and for me it is because it is an investment therefore we are expecting something in return. If we are not paying attention with our investments it's just like wasting money in gambling as you only need luck in there but with investments it's different because we need those criterias above to make our business successful.

I can see a lot of investments here in my place that owners do not think about it's importance and then the next time I heard about their business they became bankrupt it is because they do not fully understand what they are doing.

You see, what you mentioned above is the reason why a whole lots of people end up practicing gambling in the name of investment. Numerous number of people end up losing their investments because they had earlier joined those investments just by hearsay and referrals from friends but do not really take the pain, to understand the nitty gritty of the investments or investment models do go into thereby failing to make profits from it as it when necessary. This is the kind of investment you will call gambling since the person involved in it do not really understand the metrics or indices for the investments.

It is a good holistic approach to always understudy the kind of investments you're going into regardless, this is whether it's a bitcoin investment, a real estate investment or commodity investment and so on. What people don't do most of the time that results to failure, is to give in their all in learning the way the investments work.

[lixer]

While it's important to understand the products and markets before investing, Mostly when it comes to investing in cryptocurrencies, one should be able to distinguish a security from a commodity properly before any investment.

What is a security or a commodity has been a hot topic for crypto enthusiasts from the very early days. Regulatory bodies have long ruled Bitcoin to be a commodity and recently did the same to Ethereum, this means it's not about what we consider an asset to be but what it is defined to be by the authorities. Most people only classify BTC and ETH to be commodities and everything else a security, while a couple of altcoins with their own chains are making their claim to be regarded as a commodity.

If we go back a few steps though, I'll advice anyone investing in crypto to stick to Bitcoin after doing their research.

Yes, because they are still new and everyone is still confused about their real use cases but eventually all have given a light if what they are truly are. I can't remember if when did they say that Bitcoin is a commodity but I remember Ethereum was recently said to it, or by the time its ETF were accepted.

I think there is still no problem if some of us can say that they are an asset because they can also serve its function. As for security, it was only Ripple is clear to me that it was a security because higher bodies say so before. If one does their own research carefully, then no doubt that they will mainly consider Bitcoin before anything else.

[Cryptomultiplier]

* If it involves an investment of money,
* If there's an expectation of profit,
* If there's a common enterprise, and
* If there's a reliance on the effort of others.

This is true and for me it is because it is an investment therefore we are expecting something in return. If we are not paying attention with our investments it's just like wasting money in gambling as you only need luck in there but with investments it's different because we need those criterias above to make our business successful.

I can see a lot of investments here in my place that owners do not think about it's importance and then the next time I heard about their business they became bankrupt it is because they do not fully understand what they are doing.

You see, what you mentioned above is the reason why a whole lots of people end up practicing gambling in the name of investment. Numerous number of people end up losing their investments because they had earlier joined those investments just by hearsay and referrals from friends but do not really take the pain, to understand the nitty gritty of the investments or investment models do go into thereby failing to make profits from it as it when necessary. This is the kind of investment you will call gambling since the person involved in it do not really understand the metrics or indices for the investments.

It is a good holistic approach to always understudy the kind of investments you're going into regardless, this is whether it's a bitcoin investment, a real estate investment or commodity investment and so on. What people don't do most of the time that results to failure, is to give in their all in learning the way the investments work.

Our newbies ought to pay close attention to a post like this because this is a forum that will expose and open a potential investors mind to the variances in investment as well the kinds of investment that could fit their portfolio or wallet.
I belong to the school of thought that sees any investment as an individual choice or path and what works for one may work differently for another.

[NotATether]

You are not going to get anywhere by trying to differentiate a commodity from a security. You can only know if something, whatever type of financial instrument it is, is worth investing in if you have studied it carefully, and you know who are the people involved in it that make all the decisions, any good or bad news about the asset in relation to the wider world, and get other important info.

You have to know your investment like the back of your hand, otherwise it's like you're picking stocks based on the first tickers you see on the NYSE display.

[doomloop]

You are not going to get anywhere by trying to differentiate a commodity from a security. You can only know if something, whatever type of financial instrument it is, is worth investing in if you have studied it carefully, and you know who are the people involved in it that make all the decisions, any good or bad news about the asset in relation to the wider world, and get other important info.

You have to know your investment like the back of your hand, otherwise it's like you're picking stocks based on the first tickers you see on the NYSE display.

There must be difference in the each of them and it might help us if we are going to invest on them, so we still can get some where. Another important thing in investing is like you said, knowing the people behind it or their teams because they might be involved on some shady acts before.

We must also know their educational background and previous or current professions, so that we know if they are fit on the positions on the project that they are working with right now. First tickers on NYSE or on other markets must be the top assets, so why not? But there might still be underrated hidden gems, so it's also a good idea to check out the others.

[CryptopreneurBrainboss]

It would help a potential investor determine if an investment option, is a security or It is a commodity before one gets to make the final call on the investment of choice.
 The criteria includes;
* If it involves an investment of money,
* If there's an expectation of profit,
* If there's a common enterprise, and
* If there's a reliance on the effort of others.

90% of altcoin are security then with this definition because alot of them are being introduced to us through crowdfunding and it goes in favour of what a security is since we are expecting profits before buying into the crowdfunding. Bitcoin wasn't introduce through any prefunding mechanism and this is what makes it stand out. Security aren't what we should be investing into because the governments will eventually be coming after them one after the other and they will lose their value but the government can come after Bitcoin because it isn't a security but a commodity based on the definition although it is a currency and that's what we see it to be.

New Investors picking interest in the industry don't care about all that is written by the OP but as members of the forum and seeing this thread, I feel we should reconsider our decision before making any investments. There's a golden rule that I apply before any investments, if I don't know what I'm looking at, I don't buy them. Before making any investments we should do proper research to avoid losing our money to scammers because there are alot of them in the industry and they're looking for their next victim. They won't give you a break when you fall a prey due to you ignorance.

[tabas]

To be honest, most of the investors today don't look to that classification of whether Bitcoin is a commodity or a security. This applies only if we're talking about investing in crypto. A bunch of investors coming to the market buying everything that they can and they only have one in their minds and that is to multiply that capital that they have in a short period of time. And that's why it's not that important to most of us but if you're diversifying and going on with other assets, I guess that will help you out in determining on which asset class you want to invest. In the end, it's still about what did you know about the asset you're investing in.

[kryptqnick]

Why is it important to determine whether something is a security or a commodity? From what I've seen, commodities are tangible, whereas securities represent something (debt, ownership). The op is right that securities are more abstract, intangible, whereas commodities are physically available.
As for the Howey test, it is used to determine whether something is an investment or not.
IMO, Bitcoin is neither a security not a commodity, but it seems that the US position is that Bitcoin is a commodity (even though it's intangible and there's expectation of profit), whereas tons of other cryptos are securities.

[Bright0515]

Since we are in economy board let me use this medium to talk a little about economy and business. Economy is simply the state of a country or region in terms of production and consumption of goods and services. So as a business man who wants to invest in a business these are the things you have to observe, you have to know the bullrun or bear run of the business understand the region and the kind of goods that is most likely by customers.
Many people till date still experience decrease in their business cause they do not understand economy policy of a business.
My answer to your question is, as a business man understand and strategize your plan before investment because if you do and strategize it well your investment would yield.

[Adiljutt156]

Op I think,  cattle should be best investment because I like to invest in cattles and and they give profit on many  events , especially on Marriages ,  Eid UL Fitar and especially Eid UL Azha because at Eid UL Azha most Muslims sacrifice the cattles and we sell cattles on double amount of money. I also like to invest in Bitcoin because future of Bitcoin is bright and the demand of Bitcoin wil increase and we will see the digital age in next year's. I also like to invest on wheat because wheat investment is very safe but I like cattles with my passion and other investments are also good but I don't prefer any person to invest in. stocks and bonds if he has no knowledge about them and without knowledge,he will see the disaster in life and his family will be on road.

[GeorgeJohn]

In a normal circumstance you have to pre review any kind of investment you want to venture into before you go into it because it is important to make inquiries and also know the disadvantage of investment that a one to go into before you will eventually establish into that investment because market strategies of different investment have a diversity of method so a how to know the application that is suit for any investment method you are going into so that you know your ability of making a good profit for any of the Investment you are about to establish so that is the primary important for investment of different kind, in summary I think that we have to conduct a good research for any investment we are going into before we establish it for the seck of a profit making

[Cryptomultiplier]

To be honest, most of the investors today don't look to that classification of whether Bitcoin is a commodity or a security. This applies only if we're talking about investing in crypto. A bunch of investors coming to the market buying everything that they can and they only have one in their minds and that is to multiply that capital that they have in a short period of time. And that's why it's not that important to most of us but if you're diversifying and going on with other assets, I guess that will help you out in determining on which asset class you want to invest. In the end, it's still about what did you know about the asset you're investing in.

This is one reason why am sure I created this post, because some of us may not be exposed to more friends with better ideas or live in areas where it is easy to ask the right questions into the best choice of investment. This can make many do what they  think others are doing as per making profitable investment decisions.
It's important for personal research to come into play so as to aid in knowing exactly should be expected from any investment.