Hot Features
Premium
Register for real-time alerts, custom portfolio, and market movers
Cash Contracts for Difference present unique opportunities for the self-directed investor, yet on UK soil they remain largely neglected.
It’s no secret that an ever-increasing number of people is seeking ways to invest in financial instruments. This, naturally, prompts an ever-increasing number of established companies and fintech startups to do their best at offering a variety of different solutions.
Cash contracts for difference (cash CFDs) are one such fine example of a relatively new financial product that is geared towards self-directed investors looking for a simple and cost-efficient way to manage their own portfolios.
First things first: what is a cash CFD?
Cash CFDs are very similar to the more popular “classic” CFDs, which are financial derivative instruments that allow investors to speculate on the price movements of various assets, but without physically owning said assets. Unlike regular CFDs, however, the cash alternative cannot be traded on leverage. This means that anyone looking to buy this instrument will have to pay the full value of the underlying asset, but that comes with a few unique benefits as well.
The benefits of investing in cash CFDs
One advantage that cash CFDs have over their standard counterpart is that they are exempt from stamp duty fees on UK shares. The lack of leverage also means that overnight interest rates, which normally apply to overnight positions when trading on margin, are missing here as well. Lastly, cash CFDs are very flexible instruments that cover a wide palette of markets, including major indices, shares of popular companies, ETFs, precious metals and others.
Cash CFDs come in different flavours
The trading conditions for these financial derivatives might differ slightly from broker to broker. One company in the UK, for example, offers cash CFDs on indices without margin and interest, as well as the so-called “mini” cash indices that can be traded at just 1/10 of the regular price.
The bottom line
In the right hands, cash CFDs can potentially offer a very cost-efficient way of investing on the global markets, and especially so when it comes to company shares and indices.
Of course, all of the above isn’t to say that cash CFDs are perfect, and there might be times where, after comparing the differences between them and other popular alternatives, the latter could also turn out to be suitable choices. Still, depending on their financial goals, some investors might find cash CFDs just the thing they need to set their strategies in motion.
***
Risk Warning:
Non-leveraged CFDs are financial products that are not suitable for all investors. Trading these products is risky. Prices may move against you so you could get back less than initially invested.
