CFD’s

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Hi Dan:

What are your thoughts on Contract For Difference products, more so for day or swing trades I suppose. Yes you don’t own the stocks, and there is the risk of leverage, but I do see them as a way to make profit and wonder if they could be part of one’s portfolio, albeit a small portion.?. They are available for trade in Canada as I understand. I suppose they function similar to the Forex market etc.

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Asked on November 13, 2024 11:36 am
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My answer will be relatively short here, primarily because I view CFDs as a value destroyer, not a value creator in a long-term portfolio.

If you're looking to speculate a bit with a smaller portion of your portfolio, I could see a use case for them. But just keep in mind you will very likely end up losing money. They did a study 5-6 years ago that stated 3 out of 4 investors who dabble with CFDs will ultimately just end up losing money.

Overnight fees if you hold the position too long, leverage, etc makes them a purely speculative option and I'd just call it gambling really.

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Posted by Dan Kent
Answered on November 14, 2024 8:27 am
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Yes, definitely not for the long term investment horizon. Did a little more research after posting and you are right the holding fees eat into it so other than a short hold not worth it. I suppose if one say really spent a lot of time analyzing the technicals around a particular stock and were able to see trends and nuances in the market they may do ok. But like you say, it's gambling. Forex is the same, I think many who dabble lose their portfolio. Seems a lot of smart money manipulation.
(bpl521@outlook.com at November 14, 2024 10:07 pm)
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