HOW SHOULD I INVEST? LONG TERM, MEDIUM, OR SHORT TERM?
First there is no "right way" to invest. It differs from person to person. Some traditional ways of looking at it are based on age, income, dependents, risk tolerance, etc. and there are many other factors that come into play. It's best to do the research and decide for yourself or alongside a financial advisor what works best for you.
We are here to help. Take our courses, join our community, get involved! If you want to learn about something that we don't have a course on have a look at our one-on-one coaching or drop us an email. Maybe we can accommodate you.
FOR SHORT TERM TRADING THERE IS NOTHING LIKE A CFD!
What is a CFD?
Contracts for Differences (CFDs) are stock derivatives generally traded over the counter (OTC). You don't actually own the stock. Most brokerage firms act as the market maker, therefore, enabling liquidity and bid/ask spreads. CFDs are best for short-term traders but can also be used for hedging, medium-term, leveraged dividend payouts, and other ways.
There are several advantages and benefits of trading CFDs
- COMMISSON FREE - generally, the "fee" is built into the spread
- Leverage - anywhere from 10-20:1
- Traded on live prices
- Easy to short sell
- Ease of order execution, stops, limits, OCO orders, etc
- No stock trading costs - no custodian or stamp duty fees
- Dividends leveraged as well
- Collect small interest if shorts held overnight
The disadvantages:
- Leverage, unfortunately, works both ways
- Overnight interest on long positions held over night
- If holding short CFDs on Ex-Dividend day, you many need to pay dividends
CFDs can be used in many ways, however, for short-term trading, nothing can compare.
Learn more about CFDs by taking our live webinar... it's FREE!
HOW DOES A CFD DIFFER FROM A STOCK?
Here are the key differences:
| |
CFD |
STOCK |
| What is it? |
Contracts for Difference are a stock derivative product that enables investors to participate in the price movement of an underlying stock or stock index without taking ownership of the underlying instrument itself. |
Ownership of stock in a company. |
| How is it traded? |
Is an over-the-counter (OTC) product with the brokerage firm generally acting as the market-maker
|
It is generally an exchange traded product although it can be OTC as well ie: TSX Venture Exchange, pink-sheets, etc. |
| Leverage |
10 to 20:1 |
Very low if any. |
| Commissions |
Generally none. The "fee" is built into the spread. |
Yes. Varies by firm. |
| Other Fees |
Generally none. Varies by firm. |
Yes. Varies by firm. |
| Short selling |
Yes. Easy. |
Yes. Not so easy. |
| Dividends |
Yes. If you hold a long CFD position on Ex-Dividend day. Dividends are magnified by leverage.
* Be aware though, if you are short CFD position you may need to pay dividends. |
Yes. |
| Overnight Interest |
Yes, however, depends on firm. This can be beneficial (short positions) or detrimental (long positions) |
No. |
| Quotes |
Live quotes |
Generally delayed (unless you have paid for a subscription to the exchange) |
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* Some information is compiled from public sources and believed to be reliable but is not guaranteed as to its accuracy or completeness. No responsibility is assumed for the use of this material and no express or implied warranties are made. Nothing contained herein shall be construed as an offer to buy/sell, or as a solicitation to buy/sell, any security, commodity or derivatives instrument. Instruments such as Futures, Forex, Options, and CFD trading involve a substantial risk of loss and is not suitable for all investors. Please carefully consider your financial condition prior to making any investments.
