CFDs and ETFs are both excellent investment options, though one might be the better choice for you. Continue reading our CFD vs ETF (Exchange Traded Fund) guide to see which instrument you should trade & why you should trade with I-XTB – The best online broker for beginners and experts alike.
A CFD or contract for difference is a popular form of financial derivative. It’s a contract between two parties, where both parties speculate on an asset’s future price and agree to exchange the difference in the asset’s value after a specific time period. CFD traders do not buy and sell assets; instead, they bet on an asset’s price and buy or sell a contract accordingly.
The best part about trading CFDs is that it is traded with leverage, so traders don’t need too much capital to begin their CFD trading journey. Instead, you can invest limited capital and obtain greater market exposure. Plus, CFDs can be traded on a wide range of financial instruments, including stocks, indices, ETFs, bonds, blends, Forex, and crypto. Take in mind that day trading with leverage also means a higher risk tolerance, so it’s essential to have a good understanding of how the CFDs work.
Trading CFDs with leverage provides traders with the ability to gain exposure to various asset classes and underlying markets, such as stocks, futures contracts, and stock indices. At I-XTB, we allow traders to invest in over 5000 instruments through CFDs in the stock market. We also offer the opportunity to trade with leverage, as well as StoX, a product without leverage.
An ETF, short for exchange traded funds, is a type of fund that is traded through exchange platforms. The ETF provider designs and offers a fund based on an underlying asset/s that they own and then sells shares in that fund to traders.
Investors then become shareholders of the ETF, and based on the value of the ETFs underlying asset; they make or lose money. Exchange traded funds can be used to invest in a wide range of assets, including stocks, commodities, bonds and other underlying assets.
ETF trading is becoming increasingly popular as traders can easily trade ETFs on stock exchanges, making it a convenient way to invest. Broker benefits include lower fees and easier diversification. However, it’s important to note that ETF trading is different from trading CFDs, and traders should be aware of the differences before taking a CFD position.