what are the major differences in investing in futures and in individual company stock?

Answer 1

Futures contracts are bets on the value of something. One party agrees to sell a good to the other at a fixed price at a future date. If you bought the contract, you agree to take delivery & make money if the price goes up and lose money if the price goes down. If you sold the contract, you agree to sell the asset at an agreed upon price in the future. You make money if the price goes down & lose if the price goes up. WHat I described is actually a Forward Contract. WIth a Futures Contract, the contract is torn up & rewritten every day -- and any change in value is moved in or out of a margin account.

At present, there are no futures contracts on individual stocks in the US (though there are things called Equity Swaps that have similar payoffs). You can buy futures on an equity index -- which is just a bet on the future value of the index.

Buying stock involves buying it now -- rather than some time off in the future. You get all the rights of shareholders -- including dividend payments and the right to vote. You do not have these rights with a futures contract.