Posts tagged: investments

The difference between CFD and futures trading in Singapore

trading possibilitiesBoth CFDs and futures trading are popular investment options among retail traders in Singapore. However, while they may appear to be quite similar in their description of the nature of trade being ‘off the exchange,’ there is one key difference between these two types of financial instruments that would influence your choice on which to use. When it comes to trading derivatives in Singapore, investors are spoilt for choice.

Futures and options, both modern investment instruments worldwide, are available here. However, if you’re new to the world of investing or trading financial securities like futures, you might be confused by the difference between these two derivatives types.

This article explains a contract for difference (CFD) and discusses its risks. It also looks at future contracts and how they differ from a CFD. The article then compares the two financial instruments before concluding with some concluding remarks on which instrument is better suited for an investor given his risk profile.

What is a contract for difference?

A contract difference is a type of derivative product based on the difference between an underlying asset price and its strike price at the point of expiry. For example, if you were to buy a CFD on Apple Inc. (AAPL) with a strike price of $100 per share and AAPL stocks subsequently traded above $110 at expiry, you would be paid the difference of $10 x 100 = $1000 by your broker even though you never actually took ownership of the stock.

If, however, AAPL shares traded below $90 by expiration, then there would be no payout to you as the contract has no value since the share traded is lower than its strike price.

As mentioned earlier, CFDs are derivatives, so there is always counterparty risk involved in trading them.

What is a futures contract?

The main difference between a CFD and a future contract is that the former does not have an expiry date while the latter has. It means there is no counterparty involved in trading futures contracts, unlike in a CFD where your broker is your counterparty.

As such, futures traders are only exposed to minimal risks. This transaction usually takes place on an exchange platform that acts as the intermediary for both parties, assuring performance and payment. It does result in much-reduced counterparty risk. One example of such exchanges would be Singapore Exchange (SGX).

What is the difference between a CFD and a future?

The main difference between a contract for difference and a future contract is that the former does not have an expiry date while the latter has. It means there is no counterparty involved in trading futures contracts, unlike in a CFD where your broker is your counterparty. As such, futures traders are only exposed to minimal risks. This transaction usually takes place on an exchange platform that acts as the intermediary for both parties, assuring performance and payment. It results in much-reduced counterparty risk. One example of such exchanges would be Singapore Exchange (SGX).

In Conclusion

We hope this article has helped you better understand the main differences between futures and CFD trading. If you are looking to trade either of these products, we recommend partnering with a reputable broker who can help guide your decisions as well as provide access to research tools that will make investing in either product more profitable for you.

Be sure not to invest without understanding all the risks associated with both these types of trades before committing any money or taking on debt from margin lending services offered by brokers. With proper education and guidance, there is no reason why anyone should be apprehensive about entering into one form of derivatives trading or another.

If you are interested in investing in CFDs or futures, check out Saxo Bank CFD.

What Types Of Investment Risk Are There?

money risksIn the world of investments, there is a factor that is always present and you must take into account before deciding what to invest your money in: financial risk. No investment is totally safe, so any asset has its associated risks. Below we explain what types of investment risks exist so that you take them into account when investing.

What is investment risk?

First of all, you must be clear about what investment risk refers to. It is the volatility or change in the value of the investment, which can be downward or upward. The riskier an investment is, the greater the possibility that its value will increase or decrease.

Therefore, from an investor’s point of view, financial risk is the lack of certainty about the future returns on your investment. In this way, there is the probability that an event will occur with negative financial consequences, where the benefits obtained are lower than expected or that there is no return at all.

What are the risk levels of an investment?

There are several ways to classify the risks of an investment, one of the most common is characterized by the exposure or level of risk that a financial investment represents; that is, if it is a low, medium or high risk operation.

1. Low risk

It is one that is unlikely to represent losses or non-payment. Some of the investments of this type can be with the government or with banks, since they are institutions with a low probability of failure compared to other issuers such as a person or company. You must take into account that these types of investments have a low risk, but also a low generation of profits.

2. Medium risk

This level offers considerable returns, but also implies a greater commitment on the part of the investment operation due to the willingness to expose more of the invested capital. Some assets of this type are debt or real estate bonds.

3. High risk

This level of exposure provides higher returns in exchange for assuming higher volatility. Therefore, the risk of default or bankruptcy is more latent but returns tend to fluctuate more. When choosing this type of investment, it is advisable to have greater knowledge and temperament, in addition to being very active when investing and having a loss containment strategy. At this level are stocks, currencies or derivatives.

What types of investment risk are there?

There are a number of investment risks that you can face when making your money profitable; These risks may affect the development of your investment project; however, there are ways to reduce them and get good results. We present some of the main risks that you can face:

Systemic or market risk : It is a type of risk that directly affects the market as a whole, regardless of the companies in which it is invested or the sector to which they belong. For example, wars or economic crises.

Non-systemic risk : It is a risk that only affects a certain company, since it will be conditioned by a series of factors specific to each company.

Liquidity risk : The ease of conversion of an asset into money is its liquidity. Investing assumes a liquidity risk, as no buyer is likely to be willing to purchase such assets when they are put up for sale; therefore, the seller will have to sell cheaper, which will reduce his profit or bring him losses.

Credit risk : It is also known as counterparty risk. It is when the entity to which the credit has been granted is not able to return it.

Legislative risk : It is a risk that will depend directly on governments, since they are the entities that have the authority to modify or create laws that may affect companies. One way to avoid this is to invest in companies with operations in stable countries and with laws that are already in force.

Interest rate risk : It is a systemic risk that is associated with interest rates fluctuating. It impacts all types of assets, but is especially noticeable in fixed income investments, such as bonds or preferred stocks.

Inflation risk : In the event that the inflation rate of an economy grows, there is a risk that it will exceed the profitability of your investment, since purchasing power is being lost and the return on the investment would be negative and therefore , the purchasing power would decrease.

These are some of the most important risks that you can face as an investor, but they are not the only ones, since there is another series of operational risks, due to falls in asset prices, derived from a natural catastrophe, among others, that they can influence the results.

How to minimize the risk in an investment?

Investing in any investment asset puts your capital at risk, however there are some security measures that you can apply to reduce this risk to the maximum. We share some of the main ones:

Knowing the investment assets : Having more information about the assets in which you want to invest, as well as knowing and evaluating the profitability they offer you is the first way to minimize risk.

Anticipating the future : Being informed about the changes that are taking place in the country, the market, technology, property etc., will allow you to build a more comprehensive strategy that will help you decide on the management of your products. You can use house price calculator to know estimate on the future value of your property

Diversify risk : This is a golden rule in investing. It is advisable to diversify through an investment portfolio that balances highly dangerous operations with the safest.

Evaluate results : Carry out an evaluation and follow-up of your results, will allow you to build an increasingly effective strategy for the future.

Use tools for financial risk management : There are some assets that allow you to have protection by taking out insurance.

Despite the measures that you can apply to reduce the risk in an investment, you should be clear that there is no financial instrument without risk, which means that all investments include a risk even if it is minimal.

What is the investment risk in factoring?

 Factoring or factoring is an excellent investment option because it is an alternative fixed income asset with an attractive risk-return ratio. Invoices are relatively liquid, short-term and fairly safe investment assets, with average returns of 8% to 15% per year.

When you invest in an invoice, the credit risk is with the larger company that bought goods or services from the smaller company, which means that the debtor company is usually a solid company with good payment history, so there is talk of a reasonably low risk.

By investing in accounts receivable with Billed, we take care of all the operational part of the assignment, notification and collection of the invoice, so that you as an investor do not have to worry about anything in this process.

With Invoiced you invest in a diversified portfolio of invoices and thus reduce the risk of your capital.

How to Invest in Hedge Funds

equity fundsHedge mutual funds are a type of mutual fund that is structured as a private limited partnership. They are classified according to the securities they invest in and the tactics they use to manage them. Hedge funds are mainly recognized for their riskier investments, which attract wealthy investors looking for higher returns, and for those who are ready to accept bigger risks.

Hedge fund performance may assist to track the status of your investments, their risks, returns, etc. Continue to the blog to know everything about hedge funds and how you can invest in them.

What Are Hedge Funds?

Hedge funds pool money from investors and invest it in securities or other investments to make a profit out of them. Well, they are not subject to the same regulations as mutual funds. And, as a result, they have more freedom to explore investments and strategies that may raise the risk of losing money. Hedge funds are only available to wealthy investors. Investors can afford the higher fees and risks associated with investing in hedge funds.

Different Types of Hedge Funds in the Market?

Well, a modern investor has a wide range of possibilities from which to pick. In this article, we’ll go over the many options open to you.

  • Domestic Hedge Funds: Domestic hedge funds are only available to investors who are taxed in the nation of origin.
  • Offshore Hedge Funds: They are funds that are founded outside of your home nation, preferably in a low-tax jurisdiction.
  • Funds of Funds: Mutual funds that invest in other hedge mutual funds rather than the specific underlying stocks are known as funds of funds.
  • Event-Driven Strategies: Mergers, acquisitions, and bankruptcies are all major corporate events that cause a lot of movement in the stock market. Hedge funds are to profit from such changes. Those events only create volatility and making leveraged bets on this volatility can result in remarkable returns.

Everything You Should Know About Before Investing in a Hedge Fund?

Let us know about some key factors to consider while investing in hedge funds. Have a look.

  • First, become a Qualified Investor as per the criteria.
  • Read the Prospectus and Other Associated Documentation for a Fund.
  • Know how to value a fund’s assets.
  • Pose Inquiries and be clear about all the things such as where your money is going, who is managing it, and how to retrieve it, etc.

How to Invest in Hedge Funds?

You must first research funds that are presently accepting new investors to invest in hedge funds. Furthermore, to find suitable hedge funds, take assistance from a financial advisor like a Hedge Fund Manager. Though there are many research tools available online also. After you’ve looked at the fund managers and investment objectives, you’ll need to contact a hedge fund and inquire about minimum investment requirements.

You’ll need to prove that you’re a qualified investor, though there is no centralized accreditation authority or an established approach available. Because each fund uses its methods to determine your standing. For that you have to give proof of your income, debts, assets, and experience through licensed third parties. Any financial institution in that case with which you have accounts, an investment advisor, or an attorney.

Should You Put Your Money in a Hedge Fund?

Hedge funds may be a good method to diversify your portfolio and hedge against market volatility. So if you qualify as an accredited investor and are ready to invest hundreds of thousands of dollars you must invest in hedge funds. You may also take help from a hedge fund manager to know more about it before investing your money into it. For the average person seeking high returns, investing in index funds that track key indexes, is a better option.

What Services Are Provided By The Accounting Firms In New Zealand?

keep your accounts intactLike every accounting firm, the accounting firms in New Zealand incorporate the duty of auditing bank statements, accounting consultancy services and bookkeeping. These services are performed by companies who have their own accounting firms compared to the other normal accounting industries. New Zealand compared to many other international competitors around the world from the USA which serves the 80% of the Fortune 500 in the world. But for the accounting firms in NZ, they are not making a bad mark themselves as statistical reports say. The accounting firm Auckland serves as the main hub for all these accounting firms in NZ, serving important clients worldwide too.

What Separates The Accounting Firms From New Zealand From All Over The World?

These accounting firms look at 2 factors, ensuring that their clients make money and at the same they should make money too. But how do negotiate this win-win situation on the table for both the parties? Simple, pure professionalism. The USA has dominated the market in landing the big money clients, but what has stopped New Zealand from doing the same? Nothing! Advancement in technology over the years has enabled these firms to organically expand their business across international borders. How? Time to find out.

New Zealand Takes In Account All The Accounts

NZ accounting firms take in all of its resources, capital, the trained and professional human resources, henceforth they employ it all into their industry with the objective of catching and bringing in more clients, serving them to the best of their interests. This is what is provided on the table.

1. Monitoring & Controlling Business Risk Management

What is the risk here? Obviously the factor of considering that businesses can enter into a situation where there is a huge account of risks. This is why they hire accounting firms to stay beyond the curve. How do they make that happen? By using data and analytics. This is how they monitor what is happening on the charts, how they are performing and how are there competitors performing, hence this enables these firms to give them a blueprint based on predictive insight and what step to take next avoiding all those risk obstacles. Through this you are also telling your clients the consumer behaviour outcome and through this businesses with full awareness know how to optimize their business.

2. Smooth & Optimized Transactions

This is when you are enabling your business to get their money out from the customer pockets into their pockets in an efficient streamline system. Online billing systems and n transaction systems are overlooked, where the firms can circumnavigate the best way to integrate their cash flows.

3. Analyzed Risk Outcomes & Future Planning Based On Consumer Behavior

In order to integrate the consistent flow of the businesses, the NZ accounting firms take into consideration the risk and exposure it can take from all sides, predicted and analyzed through charts and monitors. This allows CFOs or CEOs to take proper informed decisions on what step to take next keeping the predictable outcomes produced by the firms, keeping in factor market behavior.

Helpful Resources to Learn about Options Trading

understanding forexForex trading is becoming more popular gradually, but as a beginner, we become overwhelmed without finding any authentic resources to learn from. Sometimes we find a source, we do not understand where to start. To solve this dilemma, strategic planning is effective and may work as a guideline to learning about Forex trading.

You won’t understand the market if you do not have a plan beforehand. The internet is a huge place, and there is no lack of resources. But problems arise when we cannot decide on things and make a plan for our Forex education. Here, we will discuss popular ways to learn about the Forex market.

List of resources:

1. Google search

In the beginning, newbies have to research well by surfing the web. A beginner can take a notepad and copy web links of different resources, which he thinks maybe helpful later. After making a list of hundreds of articles, he should give himself a break. Then, he has to start analyzing the links and reading their contents. After looking at all those links, he will have a better idea about the basics of FX trading and be prepared to take on a new challenge.

2. Webinars

Nowadays, webinars have become very popular, and beginners can enhance their knowledge about FX by attending these webinars. Using webinars, one can know about the market trends and new strategies, which are really essential to execute trades. Market leaders also get presented here as the hosts and advice about the necessary steps to be successful with the trends. Along with that, you can also take advantage of the premium articles published by high-end brokers. View this page of Saxo and read more articles to improve your skills.

Amateurs should be careful before investing their money on the webinars as fraudulent activities may be seen here too. Studies show that many of beginners lose their money by buying fake webinar tickets which do not have any value in the end.

3. Mentors

Taking the advice of the professionals in the United Kingdom really proves as a great way to gain practical skills in options trading. Mentors are conducting their trading year on year, which has provided them with an unbeatable experience. They support newbies and help them to gather knowledge about the Forex market with their live training session.

Without a professional guide, no one becomes able to know the possible pitfalls regarding this platform. To make things easier, beginners may take the help of the mentors and increase their profit by getting the live support. It is very common for beginners face many problems in real-world trading. In this case, mentors can really help them to keep on track in and achieve success fairly quickly.

4. Relatives and friends

You may find out if anyone in your family or friendship groups work in the trading business or not. Generally, this type of thing is not known about, and if we do not ask them, we will not get the truth. If we find that someone is already engaged in FX, we can ask them to help us. Asking someone’s help does not bring our reputation down; rather, it helps you to be more advanced than other beginners in the market. We may get practical skills from them and learn the ins and outs of the market, which no one else could tell us.

5. Online courses

There are so many popular courses online that can help people who are interested in Forex. Newbies can attend these courses and try to become professional gradually. One thing a beginner can do is to enroll in a paid course and open a demo FX account. They can apply the lessons they have learnt in the demo account, which may provide them with some practical skills.

These are all the easiest ways that can help you educate yourself about FX trading at the beginning of your career. Besides this, newbies should follow the market leaders on social media to say up to date with changes in the market.