Investors can enter the financial markets in a number of ways, including through ownership and through "synthetic exposure." Clarity provides exposure. Both approaches can help you make money, but there are important differences to think about when choosing which one is best for you.When you own shares in a company, it means that you actually own the underlying asset and you also have the right to vote and to receive any dividends or other distributions. Since you have a direct stake in the company and its performance, this type of investment is usually more stable and long-term.
Synthetic exposure, on the other hand, gives investors the economic risks and rewards of the underlying asset without the ownership rights. Investors can make money from changes in the price of the underlying asset without actually owning it. If you trade using your USD or ZAR account (non margin accounts) you will have 100% exposure which means you can hold your positions for as long as you like, without having to worry about margin calls or interest charges. This allows you to invest long term and potentially benefit the long-term performance of the market.
If you trade with one of your margin accounts (USD margin or ZAR margin account), you will be trading with leverage. This means that you can potentially make bigger returns with smaller initial investment. But it's important to remember that this leverage also increases the risk of losses.
Synthetic exposure also gives you more flexibility and access to a wider range of assets, including some that may be difficult or expensive to own directly. This can be especially helpful for investors who want to diversify their portfolios and get into new markets.
However, there are also some disadvantages to consider when it comes to synthetic exposure. For example, investors who buy synthetic exposure don't get voting rights, which means they cannot participate in corporate decisions. Additionally, synthetic exposure when trading with your margin accounts is usually harder to understand and requires a deeper knowledge of financial instruments and the markets.
In conclusion, both ownership and synthetic exposure have their pros and cons. Which one you choose will depend on your investment goals, how much risk you are willing to take, and how much experience you have. Before you make an investment decision, you should carefully think about your options and, if you need to, ask a professional for advice.