Are you thinking about investing in the stock market but not sure where to start? The investment world offers various options, each with its own characteristics and levels of risk. Two of the most popular alternatives are stocks and Contracts for Difference (CFDs). In this article, we will explore the differences between these two options and show you why investing in stocks may be a safer and more reliable choice.

What Are Stocks and CFDs?

Stocks

Stocks represent partial ownership in a company. When you buy stocks, you acquire a fraction of the company’s ownership, giving you the right to a share of its profits (dividends) and, in some cases, voting rights in major decisions. Additionally, you can benefit from the stock’s value appreciation.

CFDs

Contracts for Difference (CFDs), on the other hand, are financial instruments that allow you to speculate on the price movements of various assets without actually owning the asset. This means that when you invest in CFDs, you are not an owner of the asset, but are betting on its price movement.

Key Differences Between Stocks and CFDs

Asset Ownership

• Stocks: When you buy stocks, you are the legitimate owner of the asset, granting you voting rights in shareholder meetings and dividend payments.
• CFDs: With CFDs, you don’t own the underlying asset. You are simply speculating on its price, which means you don’t have ownership or voting rights.

Risk and Leverage

Leverage in CFDs allows investors to control a large amount of money with a small initial investment. For example, with just $100, you can trade as if you had $1,000.

• Stocks: Generally, stocks don’t use leverage, limiting the risk of large losses.
• CFDs: CFDs allow the use of leverage, which can magnify both gains and losses. This significantly increases the risk of large losses, especially for beginner investors. In fact, most retail investors lose money when trading CFDs.

Additional Costs

• Stocks: Buying and selling stocks may incur small fixed fees, but these are generally predictable.
• CFDs: Investing in CFDs can involve additional costs, such as overnight fees and variable spreads. These costs can significantly reduce your potential gains and increase losses.

Transparency and Regulation

• Stocks: Stocks are traded on regulated markets, providing more transparency and investor protection.
• CFDs: CFDs are over-the-counter (OTC) products, meaning they are not regulated like stocks. This can result in less transparency and greater risks for investors.

Investor Rights

• Stocks: As a shareholder, you have voting rights and the ability to receive dividends.
• CFDs: CFD investors do not have these rights since they don’t own the underlying asset.

Advantages of Investing in Stocks

Direct Ownership

When you buy stocks, you are the owner of the asset and have all associated rights, such as voting in shareholder meetings and receiving dividends.

Lower Risk

Without the use of leverage, the risk of losing large sums of money is significantly reduced, making stocks a safer option for investors.

Regulation and Protection

Stocks are traded on highly regulated markets, offering greater investor protection. At Hapi, we are registered with the SEC (U.S. Securities and Exchange Commission) and are members of FINRA and SIPC, ensuring a high level of security for your investments.

Dividend Income

Investing in stocks allows you to receive regular income in the form of dividends, which can be a stable source of passive income that brings you closer to financial freedom.

Disadvantages of Investing in CFDs

High Risk Due to Leverage

Using leverage in CFDs can magnify both gains and losses. This means that a small investment can lead to large losses if the market moves against the investor.

Additional Costs

CFDs often come with additional costs, such as overnight fees and variable spreads, which can significantly reduce your gains and increase your losses.

Broker Dependency

The quality and reliability of the broker are crucial when investing in CFDs. Some brokers may not pay dividends or may charge additional fees, negatively affecting investment profitability.

Lack of Asset Ownership

When investing in CFDs, you don’t own the underlying asset, limiting some advantages such as voting rights in shareholder meetings or direct receipt of dividends.

Conclusion: Invest Securely with Hapi

At Hapi, you are the legitimate owner of the stocks you purchase. This is one of our main differentiators. Hapi acts as an intermediary and ensures that your rights are protected at all times. Additionally, we do not engage in CFD trading, ensuring transparency and security in your transactions.

Invest securely with Hapi and enjoy the benefits of owning your investments. Join the more than 600,000 investors who already trust Hapi. Start your investment journey today and ensure your funds are protected. Sign up now and discover the advantages of investing with a regulated broker and transparent platform!

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