Pasting the article written by Goh Eng Yeow (with what i think some newbie investor might be thinking about when they read this article in RED):
Investors are making a beeline for an increasingly popular financial derivative product known as Contracts for Difference (CFDs), which enable them to 'own' these blue chips without having to stump up the full price of the stock. Wow. So you mean i can buy shares like DBS. Cool!
Brokerages jostling for a slice of the action include local houses such as Phillip Securities, CIMB-GK Securities and Kim Eng Securities and foreign outfits like IG Markets, Saxo Capital and CMC Markets. Good..think maybe i should open an account with one of these brokerages..
A CFD works like a share margin trading account. When an investor buys a CFD on a blue chip like DBS Group Holdings, he need put up just 10 per cent of the cost of owning the stock. Wah! DBS 13.00 means i only need 1.30. Shiok!!
CFDs are not traded on the SGX. Unlike warrants, for instance, they have no maturity date and an investor can cash out at any time. So good ah? Like that buy shares for what. I going to buy CFD liao
They are popular because investors can immediately track their gains or losses by glancing at the prices of the shares whose CFDs they have bought.
This is unlike covered warrants whose prices are determined by a complicated formula relating to factors like 'time-decay' - the remaining months left in the contract - and market volatility.
#1 - The Greatest Mistake
#2 - Protect What You Cannot Afford to Lose
#3 - Spend Less Than You Earn
#4 - Spend Less Or Earn More
#5 - Buy Assets Not Liabilities
#6 - Read and Learn More
#7 - The Magic of Part Time
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