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- CFDs as Type of Investment
- Advantages
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- CFD Trading vs Spread Betting
- CFD Trading vs Share Dealing
- CFDs vs Futures
- Guide to CFDs
- CFD Trading Strategies
- Frequently Asked Questions
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CFD Trading Advantages
Contracts For Differences are an investment instruments and it is vital that you understand the advantages they to offer and how to exploit them to increase your returns on investment.
The advantages of Contracts For Difference can be resumed as follow:
- Stamp Duty - you do not have to pay the added expense of stamp duty because you are not purchasing the stock. You will however be required to pay capital gains on the profit you make from your transactions.
- CFDs & Dividends - investors in CFDs contracts will also benefit from any equivalent dividends by the shareholder company as long as that contract is active.
- Longs & Shorts - dealing with CFDs allows you to go short as you are basically taking your risks within the rise and fall of the share prices.
- Margin Trading - you can make your investment pounds go further as you trade on margin, which means no need to invest the full value of the shares. The average amount you will be required to invest will be between 5%-20% of the value of the stock. As you can see this gives you the ability to be more diversified in your investments.
- Simplicity and Transparency - CFD trading is easy and it is not more complicated then the share dealing, one CFD is usually equal to one share, so it is all transparent and not confusing.
- Transaction Costs - trading with Contracts For Difference offers lower transaction cost over share dealing. And only the interest cost that is involved in holding long CFD trades can outweigh share trading; whereas stamp duty is incurred with share dealing.
CFDs are handled much differently than your regular portfolio. These are not something that you would sit on to ride out the storm; your transactions take an entirely different format. To begin with, tread slowly and increase your CFD portfolio as you become comfortable with this exciting business venture.
Remember that you really must apply sound thinking and making the right judgment calls when it comes to the CFDs. Gearing is a great opportunity but on the other hand it can be a very costly endeavour as well. It can quite easily happen that you could not only lose your initial investment but more as well. This is something that must never be forgotten when dealing in CFDs and investors should bear in mind that the losses can go beyond the initial investment.