By chris
There are many different ways to invest your money, and each has its advantages and disadvantages. If you’re looking for a way to invest in Singapore that offers excellent potential returns, CFDs may be the right choice; find more info here. Here are nine reasons to invest in CFDs.
CFDs offer high leverage
When you trade CFDs, you can choose to use a high degree of leverage. Leverage is the ratio of your investment to the amount of money borrowed from your broker. For example, if you’re using 50:1 leverage and invest $1,000, you’re trading $50,000 worth of the underlying asset.
It can be beneficial because it allows you to make a more significant profit from a slight price movement in the underlying asset. Your losses can be magnified, so you need to be careful how much leverage you use.
You can short sell with CFDs
When you short sell with CFDs, you can profit from price declines in the underlying asset. It allows you to make money even when the market is down, making CFDs an excellent investment option for risk-averse investors.
For example, let’s say you believe that the price of a stock will fall in value. You can sell the stock now, hoping to repurchase it at a lower price and make a profit later. If your prediction is correct, you can repurchase the stock at a lower price and pocket the difference as profit.
CFDs are highly liquid
When you invest in stocks or commodities, there may not be enough buyers and sellers for your order to be filled quickly, resulting in delays or slippage, which will eat into your profits. Because CFDs are available from several different brokers worldwide, they’re highly liquid investments that offer fast trade execution times.
Trading in CFDs is easy
Another reason to invest in CFDs is that it’s easy to learn how to trade them. Many online platforms and trading tools are available that make it simple to understand price movements, track market trends, and place orders. It makes investing in CFDs a good fit for novice investors who don’t have much experience with trading or investing.
You can diversify your portfolio with CFDs
If you want to diversify your investment portfolio, you may want to consider using CFDs. Because CFDs allow you to trade on the value of many different underlying assets, such as currencies, stocks and commodities, you can use this strategy to minimize risk and maximize returns from your investment portfolio.
Hedging is possible with CFDs
Another benefit of trading in CFDs is that you can use them to hedge an existing investment position. For example, let’s say you’ve invested a large amount of money in the stock market but are concerned about potential losses shortly. You could open a long CFD position for that asset and a short CFD position.
If your original investment was profitable and the price falls, both your positions will be profitable and reduce your overall risk. If your original investment was not profitable and the price rises, both your positions will lose money, cancelling out any gains from one another. It allows you to protect yourself against both rising and falling prices in the market.
You can trade CFDs on margin
When you trade-in CFDs, you can do so on margin. You only need to put down a small deposit, known as the margin, to open a position. The margin required will depend on your broker and the asset you’re trading, but it is usually between 5% and 20%.
It can be beneficial because it allows you to make a more significant profit from a slight price movement in the underlying asset. Your losses can be magnified, so you need to be careful how much leverage you use.
There’s no stamp duty on CFD trades
In Singapore, there’s no stamp duty on CFD trades, and it means that you won’t have to pay any taxes on your profits from the investment. It also makes it easier for you to access your money promptly.
You can use CFDs to go short
If you’re bearish about an asset or market, you can use CFDs to make money even when prices fall. As we mentioned earlier, this is because you can sell stocks without actually owning them, then repurchase them once their value has fallen and pocket the difference as profit. It would help if you opened a short position using a CFD broker.
