Saxo Group
Summary: Are you putting too much stock in stocks? Take a minute to discover the unique benefits of expanding your portfolio into contracts for difference (CFDs).
At the end of 2018, the total market capitalisation of all stocks worldwide was just short of USD 70 trillion*. That’s quite the tidy sum. But it’s not hard to see the appeal of stocks for investors. For starters, they:
Source: *Market capitalization of listed domestic companies (current US$),The World Bank.
CFD is short for ‘contract for difference’. A CFD is a derivative product that enables you to trade financial markets, including stocks, forex, indices and commodities, without having to own the underlying assets.
When you trade a CFD, you enter into a financial contract with a broker to exchange the difference in price of an underlying security (such as a stock) from the moment you enter the trade to the moment you exit it.
For example, if you think Apple’s share price will go up in value, you can buy a stock CFD at the current market price. If Apple’s share price then rises and you sell your CFD at the higher price, your broker will deposit the difference into your account.
While that might sound like standard stock trade, trading a CFD offers some unique advantages, which we’ll explore in more detail below.
There are two major advantages CFDs offer over traditional plain vanilla stocks: leverage and shorting.
1. Leverage
CFDs enable you to increase your purchasing power as you can trade them on leverage. This means you only need to put up a fraction of the full value of your trade – the ‘margin’ – to gain full exposure.
On most stocks, Saxo offers leverage up to 10x (and up to 40x on stock indices). This means that with only SGD 1,000 in capital, you could gain exposure to SGD 10,000 worth of stocks. That’s 10 times what would be possible with a conventional stock trade.
Aside from those two major advantages, CFDs have a range of unique characteristics.
Before you start trading it’s important you’re aware of that the value of equity index CFDs can go down as well as up. Losses can exceed deposits on margin products. As with other complex products, equity index CFDs come with a high risk of losing money rapidly due to leverage. In fact, 71% of our retail investors lose money when trading CFDs. You should consider whether you understand how CFDs or any of our other products work and whether you can afford to take the high risk of losing your money.
If you generally invest in stocks but would like to give CFDs a go, you can switch between the two products quickly and easily with Saxo. If you have a stock open in our trade ticket, you can switch straight to a CFD trade simply by clicking the CFD icon in the top-right corner. With just one click of a button, you’ll be able to add leverage and shorting to your toolbox, and take advantage of all the other benefits CFDs offer.
We’ve won multiple awards from the likes of Finance Magnates and ADVFN for our products and platforms. But the real reason stock and CFD traders choose us is that we’ve built a well-rounded offering that provides maximum trading flexibility. We can offer you:
Source: **Best CFD retail broker, 2018, Finance Magnates.
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Ole S. Hansen,
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The tide has turned for bonds. Given the current yields, bonds have become an attractive investment, with added benefits including lower risk than stocks, increased diversification and a steady stream of income unaffected by economic changes.
Peter Siks,
Investment Coach
