To enable you to receive the economic returns of a share, and the ability for you to own the economic interest in a portion of a share, you enter into a Contract with Investec. This contract takes the form of a standard CFD (Contract For Difference).

While having the economic exposure to the share, ie. if the share goes up by 10%, your investment return is 10%, if the share pays a R5.00 dividend you get a R5.00 cash flow under the contract. You have the rights to the economic returns. This is true if you fund the contract fully or if you trade on leverage.

When you trade on the Clarity platform now, you trade a Contract with Investec.

What does this mean, and how does this differ from buying shares?

Buying shares refers to purchasing actual ownership in a company. When you buy shares in a company, you own a portion of that company and are entitled to a share of its profits, voting in the company and typically cash flows from the company in the form of dividends.

CFDs give you access to the performance of that share – including benefitting from any gains or cash flows (for instance, dividends). While having exposure to the ups and downs in the share, you don’t own the share and don’t have voting rights. CFDs also enables your to buy portions of a share, which is not possible if you own the share in your own name.

CFDs are often associated with higher risk/speculation. On Clarity, you fully fund your CFD, so your economic exposure is the same as owning the share and thus the risk is similar if you are comfortable to contract with Investec. If you understand margin/leverage trading, a margin account can be accessed on Clarity (Click here to learn more).