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What is the difference between a CFD and Equity Share?
What is the difference between a CFD and Equity Share?
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Written by Chanel Schermers
Updated over 5 months ago

The below table outlines the difference between trading or investing with a CFD(Contract for difference) and a Equity share. Click here for a full explanation on what a CFD is.

Aspect

Equity (Stocks)

Fully Funded CFD (Contract for Difference)

Leveraged CFD (Contract for Difference)

Ownership

Yes, implies actual ownership in the company

No direct ownership of the underlying asset, but full economic returns (price return and distributions).

No direct ownership of the underlying asset, but allows for amplified price speculation.

Rights and Dividends

Potential voting rights and dividends as part of ownership.

No voting rights; does include cash adjustments for dividends.

No voting rights; does include cash adjustments for dividends.

Value and Returns

Value linked to company performance; returns through capital gains and dividends.

Value based on the price movement of the underlying asset; suitable for various market conditions. Returns through price movement and distributions linked to dividends.

High potential returns due to leverage; suitable for both rising (long position) and falling market (short position) conditions.

Risk

Market risk present; investment can lose value, limited to the amount invested.

Market risk present; investment can lose value, limited to the amount invested.

High market risk; potential for rapid losses, but can be managed with stop-loss orders and other risk management strategies.

Investment Horizon

Typically preferred for long-term growth and income.

Flexible; can be used for short-term speculation or long-term holdings.

Primarily used for short-term speculation; not typically recommended for long-term investment due to implied funding costs and volatility.

Leverage

No leverage

No leverage

High leverage, significantly increasing potential returns but also potential losses.

Voting Rights

Usually includes voting rights in corporate decisions.

No voting rights.

No voting rights.

Margin and Financing Costs

Brokerage (commission), exchange and custody fees

Spread only (max 20 bps); no funding costs

Spread (max 20bps); funding costs


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