The Forex market is not only working with currency pairs. Its decentralization gives investors the opportunity to independently choose assets. A variety of opportunities allows you to make money on the difference in prices of financial instruments. Choosing CFD for securities, a person can use an asset, even if he does not own it.
Features of securities in the modern world
The stock market is the oldest among all financial markets, the main purpose of which is the accumulation and distribution of money capital from investors to issuers of securities. Today it includes 200 exchanges on which tens of thousands of securities are listed. You can find companies that own more than 50% of total capitalization on our xStation5 and MetaTrader 4 platforms.
Constant changes in the stock market led to the issuance of securities in electronic form. This allowed for flexibility in investing.
Now the stock or bond is an electronic record that you own it. Securities are kept in special accounts of the depot, which resembles depositing money in a bank. This principle was reflected in the depositories, which from huge safes turned into servers with electronic records about the owners of securities.
When buying and storing securities from a liquidity provider, dividends go to the supplier’s account, not to yours. Further, the depository distributes payments to all customers.
In theory, an investor has the right to transfer accounting to the register of shareholders of the issuer, receiving materials directly. The registrar will handle the registry.
Practice shows that accounting rights through the registry when working with Russian stocks is much more expensive, and with the US this possibility is a simple hypothesis. Given the rapid changes, we had to look for an alternative to a direct purchase through a broker, which became access to the performance of operations by contracts for difference (CFD) of securities.
What you need to know about the alternative to the direct purchase of shares?
CFD - contracts for difference, where securities act as the underlying asset. At the conclusion of such a contract is the transfer of the difference between the current and final value from one side to the other.
Such work with shares in practice has practically no significant differences from working with real shares. There are three main points that are important to pay attention to:
- the transaction is closed relative to the price, the investor does not receive the asset for personal use;
- purchasing a CFD, the buyer can not receive interest income;
- The transaction is conducted between two parties - the broker and the speculator.
Given the above nuances, an investor can work with securities under simple and affordable conditions:
- the presence of a low starting threshold due to the possibility to invest even in one share;
- over 1,500 securities available;
- it is possible to instantly open and close a transaction;
- To invest in stocks, you can use a browser or a mobile application, saving you time to install and learn the platform.
The easiest way to figure out the example. Suppose you open a deal to buy securities of a well-known company that does business in New York. The principle of CFD on securities is used to conduct a transaction, while there is no purchase of a real asset.
Beginners may think that the broker is losing on such instruments. They are wrong, because in his favor are three factors:
- 85% of market participants lose money, the broker gets the rest;
- increased spreads and commissions play into the hands, bringing additional profit;
- the company has the right to open opposite positions on a real exchange in an automatic mode, hedging the positions of clients.
Such benefits bring broker companies a considerable profit, giving people the opportunity to work with CFDs. Both broker and investor receive their share.
Should I replenish my portfolio with exchange contracts?
Securities CFDs have long become a convenient and efficient tool. Among the main advantages is the fact that the investor does not receive shares in the property. For profit, he does not have to have a large deposit and meet the requirements of a qualified investor.
Among other advantages it is worth highlighting:
- no commissions;
- increase in profit through leverage;
- CFD does not lose its relevance due to the dynamic market;
- on one platform you can work with stocks and other financial instruments.
If you haven’t had any experience with securities CFDs before, it’s worth a try. They provide more options than currency pairs. Investors, they helped to build the perfect portfolio, significantly increasing their profits.