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So i have seen multiple treads about cfd for long term investing, I post a selection for those who could be interested:

They say the main disadvantages of cfds are Margin, Fees and the broker being a market maket or going bankrupt. So they highly discourage them for long term investing. but my case is different... because right now ActivTrades is proposing an account with no fees and commissions if u accept to have 1:1 leverage. In the state where I live, the accounts are also legally guaranteed against bankruptcy up to € 100,000. So I wouldn't have that risk either.

The other brokers that allow you to invest directly in the underlying product without using cfds all have relatively high commissions compared to the capital that I am willing to invest, the possibility of investing without commissions would be a great advantage at the expense of having to invest through cfds...

Given these conditions, are cfds still a bad idea for long-term investing?

All opinions are welcome

Thanks

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  • Correct me if I'm wrong, but isn't a CFD with 1:1 leverage essentially the same as buying the underlying with a fixed date on which you sell? What is the underlying product in this case?
    – D Stanley
    Commented Jun 22, 2022 at 23:57
  • The difference is that with CFDs with 1: 1 leverage you must still have in the account as well as the necessary money to buy the CFD also the money eventually to cover the losses. For example if you buy the corresponding of 1000 € of the SPY ETF and the price of the ETF loses 50% compared to when you bought it. To cover the margin and keep the position you will need to have 1500 € in the account.
    – Lorenzo
    Commented Jun 23, 2022 at 0:01
  • For the same reason, one of the possible advantages of CFDs is that you can immediately invest the profit you have made in other positions without having to close the other position. Despite this, you have all the advantages of owning the underlying asset because you still receive dividends or stock splits
    – Lorenzo
    Commented Jun 23, 2022 at 0:06

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