3 reasons to consider investing in CFDs in 2025
CFDs can offer a variety of potential benefits to investors, including diversification, liquidity and more.
Sponsored by Pepperstone. To learn more about trading CFDs, visit the Pepperstone website today. Trading CFDs/FX carries risk and is not suitable for everyone. Refer to our PDS and TMD. Pepperstone Group Limited, AFSL 414530.
A contract for difference – also known as a CFD – is a derivative trading product.
It's a contract between a buyer and seller based on a speculative future price of an asset.
The parties involved don't own the underlying asset. Instead, they agree to buy or sell on a preset date.
As you might expect, this is considered a high-risk investment product. Prices of assets can change rapidly and drastically.
However, for experienced investors, they can potentially offer a range of benefits.
1. Opportunities in rising and falling markets
Traditionally, investors make money when the market is performing well as a whole.
But CFDs also allow investors to take a position on prices going down, too.
So if there's a wider market downturn, CFD investors are still left with options.
It's important to note that this still involves risk, as markets can change so quickly.
Using tools like a Pepperstone demo account can help you trial strategies without placing your funds at risk.
Developing your skills in a range of market conditions can help you spot better opportunities, trial different trading strategies and practice risk minimisation.
Having access to live streaming prices, such as those available through the Pepperstone trading platform, can help make more informed decisions.
2. Diversify your portfolio
As with many types of investments, diversification is also a key driver for CFD traders.
CFDs can provide investors with a way to experiment with a range of different asset classes, without all of the baggage involved in outright owning specific shares or assets.
For example, with Pepperstone you're able to select from more than 1,350 CFD instruments across a huge range of industries.
CFDs are also considered to be a relatively liquid asset, due to the typically fast turnaround times on contracts.
This can help add liquidity to a portfolio that may otherwise be relatively static.
In turn, this can allow for funds to be generated for other opportunities through relatively fast trading.
Similarly, having access to a diverse range of trading platforms can be useful to suit your unique portfolio needs.
In addition to its proprietary platform, Pepperstone also offers access to TradingView, MetaTrader4 & 5 and cTrader.
3. Greater leverage as an investor
Investing in CFDs means that you don't need to buy the underlying asset. You're simply taking a position on its pricing.
With Pepperstone, retail clients in Australia can trade with up to 30:1 leverage.
Professional clients can trade with up to 500:1 leverage.
In practical terms, this means you've got the potential for profitability while using less funds for your initial outlay.
There is still considerable risk involved.
Due to price fluctuations, it's possible to lose more money with CFDs than you initially invested.
Staying current with market education through providers like Pepperstone can be an effective way to develop your skills.
This can help you make more informed trading decisions in the long run.
Learn more about trading with Pepperstone today
Pepperstone does not require a minimum opening deposit. Commissions vary according to the asset being traded but start at $5 or 0.07% on AU Share CFDs.
