Finance Tips

When you look around your neighborhoods, it’s hard to find any good news. Friends and neighbors may have lost their jobs or be on short-time. There are foreclosed properties on every street. Shops and businesses have been closing down with increasing frequency. These are the signs of a real recession where unemployment and poverty stalk the land. The cause of all this pain is not hard to find. We have all been living beyond our means. When the banks and credit card companies offered us more money to borrow, we just took it. Why bother to save when the value of our homes only goes up? Let’s plan for our retirement by borrowing cheap money and buying stocks and other more risky investments. No-one ever loses if they follow the advice of the credit rating agencies. Well, we know better now. What goes up can also come down. What is given a triple A rating can be junk tomorrow.

In the midst of all this chaos, the credit card operators have been cutting back on the borrowing limits. This has forced pain on us for two reasons. Firstly, finding the money to pay down our debts more quickly means redesigning the family budget. Sacrifices have to be made. Secondly, the way the credit score is calculated depends in part on the extent to which we use the credit cards we have. If the limits are reduced, we look like bad risks because the amount borrowed is closer to the limit. We have less money available to borrow and cut down on card usage so we can repay faster. Put the two together and the score falls. This is a direct criticism of the methods used to calculate the scores. It produces a fundamentally unfair result during a recession.

This would not be a problem if the credit score was only used by banks and credit card operators. But it’s also used by companies to help decide whether to employ you, by landlords deciding whether to rent to you and by insurance companies deciding whether you are a responsible person. National figures show more than half all insurance companies use credit scores as a key factor in deciding your premium rate. This is extraordinary. There is only one possible effect of being in debt when it comes to the way in which you drive. If you cannot afford to repair your vehicle, you drive defensively to reduce the risk of an accident.

Some states like California and Massachusetts have banned the use of credit score for this purpose, but they are a minority. They cite discrimination as a reason for the ban. The majority of the population without access to banking services and credit cards fall into minority racial groups. When they do not have a credit score, they are forced to pay a higher premium simply because of who they are, not how they drive. So, when you are looking for affordable cover, get the maximum possible number of car insurance quotes to find the best policies. If you live in a state which refuses the regulation of the car insurance market, contact your local government representatives and tell them how much pain you are suffering because of this unfair use of credit scores.

The majority of CFD brokers in Australia offer CFDs over the stocks making up the ASX top 300, the rationale behind this is straightforward, stocks with a larger market capitalisation tend to be much more liquid. Some CFD brokers forget that we live in Australia, a land abundant with resources and naturally also rich in resource shares. A large amount of shares listed on the ASX are resource based, this is in fact the largest sector of the Australian share market.

CFD trading over junior mining shares can be enormously rewarding if you choose your stocks prudently. When buying and selling CFDs over speculative shares you should perform some research on the company. Prior to selecting your stocks you must ensure that the company has high-quality management and an excellent project. Needless to say if the copper price has gone up and you are searching for exposure to stocks in this sector logically you would not choose a CFD over a stock with gold assets, this is the reason picking stocks within the relevant sector is also crucial. It’s always crucial that you keep in mind buying and selling CFDs over speculative stocks has risks as these sorts of shares can go up in price as quick as they can come down.

So why a trade CFD rather than buying the Share outright?

The answer to this question is simple and can be summed up in a few words, unrealised profits and losses. Unlike shares CFDs are marked to market every day meaning that the profits or losses are credited or deducted to and from your account each trading day. The profits and losses from trading shares are treated very differently in that they’re only realised once the stock is sold. Realising profits and losses on a daily basis means that you can use your unrealised to profits to open up new positions without having to deposit additional money into your account, of course the same goes for losses in that you’ll have to deposit cash into your account if the position moves against you.

It’s crucial that you note a good number of speculative shares could have a larger margin obligation than shares in the ASX top 300, their margin requirement can easily be as high as 100% however the majority are offered on a margin of 75%. One crucial factor to think about here is whether your CFD company will charge you financing on the full notional worth of the position, this could of course be quite high if the position was on a 100% margin, there are however a number of CFD brokers that will only charge financing on the borrowed amount. It would be far more cost effective to select a CFD company that will only charge you on the borrowed amount, if the CFD is on 100% margin this will likely deliver a large cost saving.

There are hardly any CFD companies in Australia which will allow you to trade CFDs on all ASX listed stocks, one of the most common CFD providers is IC Markets. One of the key advanatages of trading with IC Markets is that they do not have any CFDs on 100% leverage and only charge financing on the borrowed amount meaning that you won’t pay any financing charges for CFDs purchased on 100% margin.