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Europe Invest Control advises investors against investing in CFDs

Contracts for Difference (CFDs) are bets on differences in exchange rates. This kind of trading is highly speculative and totally unsuitable for average investors. Private investors should, if at all, only invest very small sums of money, the loss of which they can recover easily. The enormous risks, above all the obligation to make additional, unlimited payments, are grossly disproportionate to the average rates of returns.

The investor enters into an agreement with the provider regarding the difference in exchange rate of a certain base value. This may include shares, indexes, commodities, currencies, bonds and other securities. Investors may bet on rising or falling rates. He earns money if the market prices increase. If the prices decrease, however, the difference will be charged to his account. This continues until the position is closed at a profit or a loss.

The average private investor is hardly capable of foreseeing the repercussions of extreme changes in exchange rates on his assets. Attention should also be paid to the fact that a CFD has no real counter value. As mentioned above, it is simply a bet. If you bet on a rising gold price, you do not receive any actual gold, but merely the promise to receive money if the gold price rises. This is why you should consider carefully with whom you make this bet.

We were concerned to realize that more and more accounts with CFD providers have been arranged by dubious agents lately. Investors have been lured with promises of high returns and have been kept in the dark about the true risks. This is why we would once again like to draw attention to the fact that, as with all investments, questions about the risk profile and the experience in capital investment should always be answered correctly. If an investment adviser encourages you to give false information in order to be eligible to purchase the product, this means that the product is not suitable for an investor with this profile. Such an investment adviser is not interested in giving good advice but in his profit at all costs.

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