As I am saving money from my first time I want to follow the defensive investor profile Graham defined in the Intelligent investor with the objective of doubling the amount invested before withdrawing my funds (this objective was created out of nowhere but at least I have an objective). Indeed I don't have enough time for being aggressive. However I discovered Contracts For Difference (CFDs) on Etoro, the plateform I'm using on for my trades.

I'm not sure I understood perfectly what it is so I don't feel confortable enough to use them yet. It is borrowing money to get more units of a share/equity, with daily and weekend fees of course. But we don't buy the asset. It seems we only borrow it and trade on the price difference.

However is it in accordance with the defensive investor profile?

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    "Indeed I don't have enough time for being aggressive." How much time do you have? Are you saving for retirement and you are almost of retirement age? Or are you wanting to buy a house in a few years? Apr 16 '20 at 10:31
  • @mhoran_psprep rather buy a house in a few year than saving for retirement. I promise myself to give it two days a month Apr 16 '20 at 10:43
  • So the aggressive part is based on hours per month you have to focus on your method of investing, it isn't that you have to double your money in 3 years. Apr 16 '20 at 10:50

However is it in accordance with the defensive investor profile?

No. The point of the "defensive investor" is to minimize risk when one is unwilling or unable to put in the time required to make solid, conservative, value investments (in his day that meant reading many financial statements and identifying mispriced stocks). CFDs actually increase risk through leverage.

With CFDs you can lose your entire investment very quickly. When CFD brokers give examples they typically give examples of how quickly you can make money, but they undersell the risk of losing.

Imagine you have $1,000 to invest in a stock that costs $100. You can either invest $1,000 in 10 shares and watch it grow (on average) over time. Or you can buy 50 CFDs and use the $1,000 for your 20% Margin. Now if the stock goes up 10%, you've made $500, for a 50% return! Sounds great, right? But what happens if the stock drops 20% in a crash? You've lost your entire margin and have to come up with more or sell your position for a 100% loss.

Leverage works both ways, it multiplies gains and losses. I would not call that "defensive" investing.

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