CFD viable way to access offshore markets?

[rayonline]

Hi all, with some funds in a term deposit / savings account (4.60%) I am just getting into this after Kiwisaver, MRP, I am planning to build up a portfolio with the larger NZ bluechip stocks and hold them for some time than "trading". I have heard you can go offshore and get some online brokering companies which are chepaer than ANZ/ASB Securities ($50-70USD) when tapping into the markets further from ASX but then you have international bank charges etc. Also due to the $30 brokerage fees I won't be doing it short term.

Re: CFD. The fees are lower and it is a NZ located company that has offices around the world. Means I don't need to deal with a offshore entity. Yes there is leverage. Instead of putting in $5,000 and have mega gains and mega loses. I could put in $20 to access $10,000 CFD - indices with a 0.20% margin. So I could treat this like normal shares right? Should they have a 10% up/down I only withstand to gain / lose $1,000. The commission is around $10US buy/sell. The holding fee is around 2.80%.

[blackcap]

Hi all, with some funds in a term deposit / savings account (4.60%) I am just getting into this after Kiwisaver, MRP, I am planning to build up a portfolio with the larger NZ bluechip stocks and hold them for some time than "trading". I have heard you can go offshore and get some online brokering companies which are chepaer than ANZ/ASB Securities ($50-70USD) when tapping into the markets further from ASX but then you have international bank charges etc. Also due to the $30 brokerage fees I won't be doing it short term.

Re: CFD. The fees are lower and it is a NZ located company that has offices around the world. Means I don't need to deal with a offshore entity. Yes there is leverage. Instead of putting in $5,000 and have mega gains and mega loses. I could put in $20 to access $10,000 CFD - indices with a 0.20% margin. So I could treat this like normal shares right? Should they have a 10% up/down I only withstand to gain / lose $1,000. The commission is around $10US buy/sell. The holding fee is around 2.80%.

Seems like you have done your homework. Be careful with CFD's in that you are not buying the underlying security. What happens if the CFD company goes belly up? Also you cannot sit on the bid waiting for the market to come to you.. you have to take the price that they (CFD company) stipulate. Be aware of the "interest" charges that they charge and other costs involved. You may also want to see if you get the imputation credits that are due on dividends. Do not know if CFD's pay them out or not as it would, but cannot see how they can as you are not buying actual stock. Other than that the brokerage is a lot lower yes as all you are doing is buying their own paper. And the leverage can be handy but is a double edged sword.
If you do not mind me asking, which company are you looking at? From your initial description I might put a small wager on that its IG Markets?

[rayonline]

Interest is the holding cost right? Just CMC Market. Just toyed around with the demo account. Double edge sword yes. From my view I don't want or need leverage, just diversify overseas. Holding cost is 2.8% can be quite a bit.

[blackcap]

Interest is the holding cost right? Just CMC Market. Just toyed around with the demo account. Double edge sword yes. From my view I don't want or need leverage, just diversify overseas. Holding cost is 2.8% can be quite a bit.

I don't know about the holding cost aspect of CMC markets but that sounds right. All I can say is do your own research. As you stated that you were not going to use them to "trade" but buy and hold in theory it could work. Again check out the caveats I listed above. Others may know more than me and have more to offer. Not willing to cast doubt on CFD companies, if you were trading there is the question of "stop hunting" which unscrupulous outfits do partake in but that will only bite you if you are looking to trade.
Diversifying overseas has been the problem for many a NZer in the past. I am lucky that I have broker accounts in Europe and their offerings are vast and each contract costs about 10 Euro brokerage. The ASX also offers many ETF's that you may want to look at...
http://www.asx.com.au/products/etf/m...oduct-list.htm

[rayonline]

Thanks.

I need to build up in the NZX first. It was just a thought and yeah to diversify out of NZ and I don't have any accounts overseas banking or what not. Just out of interest with ASB/ANZ do they provide NZX and American indices? Maybe the $50-70 fees isn't that bad after all for a buy and hold approach over time .... You are correct with the issue that I don't actually own the share with CFD. As an outside, with the foreign markets the issue might be, being in NZ I just don't have that local feel for it.

Just to add -
CFD can be quite pricey to hold. Ie $5,000 value in shares, 3% of this is $150 for a year which is subtantially more than ASB/ANZ's brokerage fees or about the same to both buy and sell with the inherent risks of an CFD. That is if Iam not interested in leverage.

[RobbieS]

Ray

Just be careful with CMC markets. Their CFD price does not always match the underlying value of the stock in the stock market. But IG markets do match their CFD price to whatever underlying value of the stock is. Therefore, I've been using IG markets for investing in "shares" only in the companies around the globe.

I'm not a day trader so i pick stocks very carefully in companies that have stable returns plus dividend. Just remember that by using leverage, you don't need to invest in high growth stock. Just invest in mature companies and if the stock goes up 10%, you make 40% return (based on 25% margin on stock).

Trading in indices?? It's better to buy lotto every week than gambling on indices and currencies.

Good luck

[rayonline]

Wouldn't indices be more stable without the larger drops and rises?

RE: I am just playing around with the demo. When you close the deal is the profit / loss figure taking account of all costs? Ie - holding costs and stop loss? I will have a look at IG Markets. Also is the demo using real data? Still trying to find a way with CMC Markets - how to set a gauranteed stop loss and a take price (close deal).

[Schrodinger]

Why dont you just use a managed fund if you are so keen to get into markets other than NZX/ASX? If you have a tiny portfolio I would strongly advise against going outside Australasia until you have some more experience.

[rayonline]

Why dont you just use a managed fund if you are so keen to get into markets other than NZX/ASX? If you have a tiny portfolio I would strongly advise against going outside Australasia until you have some more experience.

The (%) management fees assoc. with it is turn off versus pick one or two stocks overseas and pay the expensive ASB/ANZ's $70-90NZ fee. Might as well pay that brokerage fee.

I've looked at some brochures like from Craigs Investments, a fund with purely overseas equities funds dont' seem to return that great versus say NZ equities or a balance/grown diversified fund - ie - a bti of everything NZ and overseas. And .. these are the pro's doing it.

If I were to go overseas I would just pick one or two or three at most the base of my portfolio would be on the NZX.