CFD SIPPS – A Summary

We've just published a new T2W article called "CFD SIPPS – A Summary" by Andrew Collins.

Quick Summary: Including CFDs in your SIPPS account can provide a number of wealth building options.

PS. Don't forget to rate the article after you've read it and share your comments on this thread.

Including CFDs in your SIPPS account can provide a number of wealth building options

Sippdeal is mentioned in the article. I have a Sipp with them (not CFD's). No complaints,
but it is important to factor in how much of a cut they take from the interest on your cash account with BOS when comparing costs with other Sipp providers.

I regularly trade CFD's and spread bet financials but would not advise that one trades these high risk instruments with your pension funds. The difference between say owning your own commercial property or other property (which would be my first choice for SIPP funds) is that the investment property is a long term investment and can provide rental income etc if the property market turns down. CFD's need a high degree of continuous vigilence which in my experience most businessmen/women who have SIPPS do not have since they are too busy running their own business. Of course, if their business is spread trading maybe!!!
I should add here that my daytime job is as a self employed IFA/mortgage broker!!

CFDs certainly have their benefits, but this guy sounds too keen to plug them with several half-truths e.g.

"Low commission costs of around 0.2% which compares very favourably to traditional stock brokers that normally charge between 1% and 2% on both sides of the transaction. On a £10,000 trade this can save you several hundred pounds just in commission costs"

Not true, most of the major brokers charge a flat rate of around £12

"You can have access to the Level 2 system giving you the ability to trade on the order book. A traditional stockbroker will always quote you the market spread which is far more costly."

Not necessarily - if you want to get filled on the current bid/offer (except for large quantities) on all SETS names you will get the same price on Level 1 and Level 2 obviously

"Flexibility: SIPPs provide full transparency in that you know exactly what you are invested in at any one time. There are not many pension fund companies that will be able to give you a detailed breakdown of how your funds are invested at any one time."

My pensions at both of the companies I've worked for have allowed me to choose where exactly I want to allocate my funds - I can't believe this is the exception.

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[QUOTE=bsheena;176930]CFDs certainly have their benefits, but this guy sounds too keen to plug them with several half-truths e.g.

"Low commission costs of around 0.2% which compares very favourably to traditional stock brokers that normally charge between 1% and 2% on both sides of the transaction. On a £10,000 trade this can save you several hundred pounds just in commission costs"

Additionally AIUI the CFD fee is on the leveraged amount, so if you pay 100 for the CFD on a typical 10-1 leveraged UK stock, the trade is considered to be 1,000 and your commission is on the 1,000 (each side of the trade) . They also charge interest for the leveraged amount, typically a couple % above libor. Holding a CFD for several months could be very pricey. If you work out how much you pay in interest and commission on any trade, and remember that you pay that win or lose on the trade, the % of your profits given over to commissions and interest can be very high.

if you are going to trade CFDs you need to anlayse in detail the probable costs against your expectations of trade profits, because you can take a significant hit.

It can be a good way to enhance profits or hedge risk but take much care to analyse costs and risks properly.