Is Vanguard S&P 500 ETF a CFD?

Asked 3 years ago

I'm not sure I understand CFD's so well. Am I correct in thinking that Vanguard S&P ETF counts as a CFD? If not, can someone please explain in laymen's terms what a CFD is?

Andrew Moran

Saturday, September 04, 2021

While the Vanguard S&P 500 Index exchange-traded fund (ETF) is not specifically a CFD (Contracts For Difference), you can trade the VOO ETF as a CFD.

Put simply, when you are investing in this index fund through a CFD, you are not investing in its price rather than the fund itself.

For example, the VOO ETF is trading at $416.57 and you want to buy 100 share CFDs because you think the price will climb to $456.57. You could get a tier one margin rate of five percent, meaning that you only need to deposit five percent of the position's value as a position margin.

The CFD tools are typically utilized for short-term strategies rather than the long-term investment objectives that an ETF is usually used for.

Just be aware that you can lose a lot of money trading a CFD.

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