CFD vs share trading, What’s the Difference Between the Two?

When it comes to investing in stocks, both in the local market and the US Stock Market, you may only be familiar with the term common stock. Especially for those of you who are still new to various terms in this investment. You probably only know that stock investing is done by buying stocks when prices are low and then selling them when prices are high.

However, did you know that when investing in stocks you can choose CFD vs share trading? Well, if you still don’t understand the difference, come on, let’s talk about it!

Common Stock Trading

As mentioned earlier, common stock trading or share trading is done by buying shares and then reselling them in the hope of making a profit from the difference between the buying and selling prices. In addition, investors can also benefit from the distribution of dividends, namely the distribution of net profits to all shareholders through the GMS.

CFD Stock Trading (Contract For Difference)

While stock trading CFD (Contract For Difference) is an investment in trading financial derivatives that allows you to be involved in the price movement of a stock without having to own shares of a company. CFD stock investments are short-term where you can buy and sell the underlying asset or security when you expect the price to go up or down.

CFD vs share trading

There are two basic differences between these two types of stocks, namely:

 Ownership

In common stock trading, you will legally own the shares of the company you are buying. So you can decide for yourself the type of investment you want. Do you want to invest in the short term with the expectation of capital gains or do you want to invest in the long term through the distribution of dividends? For more information visit the site

While in CFD shares, you do not get real share ownership but only in the form of a contract. Even so, the price of these shares still follows the prevailing stock exchange. In addition, you can still have the opportunity to get dividends if the shares are in a buy position before the specified deadline.

Leverage

Investing through common stock trading requires you to prepare funds for the price of the shares to be purchased. This is why stock investments sometimes require substantial funds as capital.

Meanwhile, CFD stock trading applies leverage, namely the comparison of margin (capital) from investors with loans from brokers to increase returns. The existence of this leverage allows you to invest more with less capital to get higher returns. Even so, the risk of this leverage is also high, especially if the leverage ratio you use is high.

what to choose? Of course, both common stock and CFD stocks have their advantages and disadvantages. If you still feel hesitant to make a decision, then there is nothing wrong with consulting the broker of your choice so you don’t make the wrong decision when starting a stock investment.

And before starting to invest, don’t forget to find out in advance how to reduce the risk of capital loss when investing in ordinary shares or investing in CFD shares, yes. Knowing, it can help minimize the losses that you might experience after investing in these two investment products.