1 00:00:03,290 --> 00:00:06,200 Sean Aylmer: Welcome to the Fear and Greed Daily Interview. I'm Sean Aylmer. 2 00:00:06,590 --> 00:00:08,540 Sean Aylmer: Every now and then on Fear and Greed, we get 3 00:00:08,539 --> 00:00:11,240 Sean Aylmer: a bit of a 101 on different types of investing. 4 00:00:11,450 --> 00:00:15,320 Sean Aylmer: Today we're looking at CFDs or a Contract For Difference, 5 00:00:15,650 --> 00:00:19,070 Sean Aylmer: which is a form of derivative trading where you speculate about the 6 00:00:19,070 --> 00:00:22,159 Sean Aylmer: rise or fall of different markets, commodities, currencies and the like. 7 00:00:22,430 --> 00:00:24,440 Sean Aylmer: I've gone to an expert for help with this one. 8 00:00:24,650 --> 00:00:27,979 Sean Aylmer: Adam Smith is the CEO of Saxo Markets Australia, a 9 00:00:27,980 --> 00:00:32,180 Sean Aylmer: global multi-asset trading and investment platform, part of Saxo Bank. Adam, 10 00:00:32,180 --> 00:00:33,170 Sean Aylmer: welcome to Fear and Greed. 11 00:00:33,590 --> 00:00:34,940 Adam Smith: Hi, Sean. Great to be with you. 12 00:00:35,150 --> 00:00:36,559 Sean Aylmer: Now you're going to have to dumb it down for 13 00:00:36,560 --> 00:00:39,229 Sean Aylmer: me on this one, Adam. CFDs have always been slightly 14 00:00:39,229 --> 00:00:42,099 Sean Aylmer: confusing to me. So let's start with some of the terminology. 15 00:00:42,110 --> 00:00:46,010 Sean Aylmer: You know, when we talk about what a CFD is, leverage, derivatives, 16 00:00:46,010 --> 00:00:46,730 Sean Aylmer: that type of thing. 17 00:00:47,120 --> 00:00:49,970 Adam Smith: Yeah, no problem. I'll start with what a derivative is 18 00:00:49,970 --> 00:00:52,520 Adam Smith: because it covers the sort of class of products that 19 00:00:52,520 --> 00:00:54,950 Adam Smith: we may well talk about over the course of the 20 00:00:54,950 --> 00:00:57,560 Adam Smith: next few minutes. But basically, a derivative is a financial 21 00:00:57,560 --> 00:01:01,820 Adam Smith: product that gains its value from the value of another asset. 22 00:01:01,850 --> 00:01:04,430 Adam Smith: So what that means is a derivative can be a 23 00:01:04,430 --> 00:01:09,800 Adam Smith: product that looks to share prices, stock indexes, commodities like 24 00:01:09,800 --> 00:01:13,190 Adam Smith: gold or foreign currencies like the Aussie dollar for their value. 25 00:01:13,340 --> 00:01:17,030 Adam Smith: So being a derivative product, it can include options, it 26 00:01:17,030 --> 00:01:21,020 Adam Smith: can include futures, it can include CFDs or contracts for difference, 27 00:01:21,020 --> 00:01:21,650 Adam Smith: as you mentioned. 28 00:01:22,010 --> 00:01:24,410 Sean Aylmer: Okay. So a derivative, it could be as simple as 29 00:01:24,740 --> 00:01:28,460 Sean Aylmer: buying a share in McDonald's in the US and taking 30 00:01:28,459 --> 00:01:31,640 Sean Aylmer: a hedge or a derivative against moves in the Australian-US 31 00:01:31,940 --> 00:01:32,809 Sean Aylmer: dollar exchange rate? 32 00:01:33,260 --> 00:01:36,850 Adam Smith: Yeah, very definitely. And that's a very good use case for CFDs. 33 00:01:38,060 --> 00:01:40,190 Adam Smith: I'll even take it a step further. So at the moment, 34 00:01:40,190 --> 00:01:44,300 Adam Smith: if you wanted, as a retail investor in Australia, wanted 35 00:01:44,300 --> 00:01:48,320 Adam Smith: to buy an Amazon share, you're currently looking at around 36 00:01:48,320 --> 00:01:51,020 Adam Smith: four and a half thousand dollars to buy one share. Now, 37 00:01:51,020 --> 00:01:54,050 Adam Smith: that potentially is beyond the reach of a lot of people. 38 00:01:54,060 --> 00:01:56,150 Adam Smith: They don't want to invest that much or they don't 39 00:01:56,150 --> 00:01:59,540 Adam Smith: have that much to invest. So you can buy a 40 00:01:59,540 --> 00:02:03,080 Adam Smith: CFD over Amazon for a fraction of the price. And 41 00:02:03,080 --> 00:02:05,930 Adam Smith: so in Australia at the moment, you need to stump 42 00:02:05,930 --> 00:02:08,510 Adam Smith: up basically 20 per cent of the cost of that share. 43 00:02:08,540 --> 00:02:11,480 Adam Smith: So that gives you an exposure to Amazon. You might 44 00:02:11,480 --> 00:02:14,270 Adam Smith: like the company. I mean, Lord knows nearly everyone's been 45 00:02:14,270 --> 00:02:16,639 Adam Smith: using it over the last 15 months. So we understand 46 00:02:16,639 --> 00:02:18,860 Adam Smith: the business model and you might want to own a 47 00:02:18,860 --> 00:02:19,640 Adam Smith: part of that company. 48 00:02:19,650 --> 00:02:21,110 Sean Aylmer: So I'm going to jump in there, Adam. So what we're 49 00:02:21,110 --> 00:02:24,369 Sean Aylmer: saying is that derivatives is the generic term, underneath that 50 00:02:24,380 --> 00:02:27,950 Sean Aylmer: we have CFDs as one such product. And this is 51 00:02:27,950 --> 00:02:29,750 Sean Aylmer: what you're talking about in terms of Amazon, how you 52 00:02:29,750 --> 00:02:30,500 Sean Aylmer: get into Amazon. 53 00:02:31,280 --> 00:02:34,370 Adam Smith: Correct. That's right. So, as I said, options, futures, CFDs, they 54 00:02:34,370 --> 00:02:37,130 Adam Smith: all sit within the derivative asset class, but they all 55 00:02:37,130 --> 00:02:41,320 Adam Smith: have different characteristics. And so, with the CFD, the payoff, 56 00:02:41,330 --> 00:02:44,510 Adam Smith: so the return, the investment return looks a lot like 57 00:02:44,720 --> 00:02:47,220 Adam Smith: if you bought a stock. So if it goes up a dollar, 58 00:02:47,220 --> 00:02:49,190 Adam Smith: you make a dollar. If it goes down at all, you lose 59 00:02:49,190 --> 00:02:52,730 Adam Smith: a dollar. But with something like an investment in Amazon, 60 00:02:52,730 --> 00:02:55,310 Adam Smith: you don't have to pay the full price of the 61 00:02:55,310 --> 00:02:57,139 Adam Smith: Amazon share to get that exposure. 62 00:02:57,380 --> 00:03:00,080 Sean Aylmer: Yeah. So am I buying, if I'm buying 20 per cent, 63 00:03:00,169 --> 00:03:02,690 Sean Aylmer: do I get 20 per cent of a share or am 64 00:03:02,690 --> 00:03:06,590 Sean Aylmer: I actually buying the full share but not paying upfront? 65 00:03:06,950 --> 00:03:10,130 Adam Smith: Yeah. So you are actually buying exposure to a full share. 66 00:03:10,160 --> 00:03:13,160 Adam Smith: You don't actually own the share. That's important to recognise 67 00:03:13,160 --> 00:03:17,480 Adam Smith: as well. But the CFD provider will effectively lend you 68 00:03:17,810 --> 00:03:20,930 Adam Smith: the 80 per cent balance that is required for you to 69 00:03:20,930 --> 00:03:23,930 Adam Smith: have an exposure to one full share. And that's an 70 00:03:23,930 --> 00:03:26,630 Adam Smith: interesting point as well, because that is effectively the leverage 71 00:03:26,990 --> 00:03:29,870 Adam Smith: that we talk about when we talk about derivative products. 72 00:03:29,870 --> 00:03:32,720 Adam Smith: So the leverage is the lending component, which in this 73 00:03:32,720 --> 00:03:35,390 Adam Smith: case would be 80 per cent of the value of the shares. 74 00:03:35,390 --> 00:03:39,619 Adam Smith: So you pay 20 per cent. CFD provider offers you 80 per cent, 75 00:03:39,860 --> 00:03:42,620 Adam Smith: and then you've got an exposure to one Amazon share. 76 00:03:43,040 --> 00:03:45,410 Sean Aylmer: Okay. So if I'm confident Amazon is going to go 77 00:03:45,410 --> 00:03:49,280 Sean Aylmer: from four thousand dollars to eight thousand dollars, and I 78 00:03:49,280 --> 00:03:51,800 Sean Aylmer: need to be confident about that, and I buy a 79 00:03:51,800 --> 00:03:55,190 Sean Aylmer: CFD for Amazon, which gives me 20 per cent exposure. I 80 00:03:55,190 --> 00:03:58,820 Sean Aylmer: get the benefit of the upside, presumably. And of course, 81 00:03:59,030 --> 00:04:00,380 Sean Aylmer: it works in the reverse as well. 82 00:04:01,040 --> 00:04:04,130 Adam Smith: Correct. That's right. So you'll you know, effectively the example 83 00:04:04,130 --> 00:04:06,860 Adam Smith: you've used there is there's a doubling in the Amazon 84 00:04:06,860 --> 00:04:12,260 Adam Smith: share price. So that's fantastic. You've contributed 20 per cent of 85 00:04:12,260 --> 00:04:15,410 Adam Smith: the value of the Amazon share, so you've made a 86 00:04:15,410 --> 00:04:19,070 Adam Smith: pretty reasonable return there. But as you say, the downside also 87 00:04:19,070 --> 00:04:21,320 Adam Smith: needs to be taken into consideration in the sense that 88 00:04:21,320 --> 00:04:24,589 Adam Smith: if the Amazon share price falls, you risk the capital that you 89 00:04:24,860 --> 00:04:27,530 Adam Smith: put it in the same way that you would if 90 00:04:27,529 --> 00:04:30,109 Adam Smith: you had bought the ordinary share. So you're exposed to 91 00:04:30,110 --> 00:04:33,380 Adam Smith: the upside and the downside. But because of the leverage 92 00:04:33,380 --> 00:04:36,650 Adam Smith: in the product, gains and losses can be magnified. So 93 00:04:37,220 --> 00:04:39,800 Adam Smith: a doubling of the share price, if you make like four thousand 94 00:04:39,800 --> 00:04:43,400 Adam Smith: dollars in this case, of an investment of 20 per cent, 95 00:04:43,400 --> 00:04:45,920 Adam Smith: which is eight hundred dollars is a five times return. 96 00:04:46,160 --> 00:04:46,789 Adam Smith: That's pretty good. 97 00:04:46,820 --> 00:04:47,130 Sean Aylmer: Yeah. 98 00:04:47,150 --> 00:04:49,910 Adam Smith: But obviously the same applies to the downside. You can 99 00:04:49,910 --> 00:04:52,830 Adam Smith: lose your investment in this case, which would be eight 100 00:04:52,850 --> 00:04:56,270 Adam Smith: hundred dollars. And that obviously means that the capital is gone. 101 00:04:56,360 --> 00:04:58,280 Adam Smith: But again, that's the same sort of risk that you 102 00:04:58,279 --> 00:05:00,620 Adam Smith: take when you buy a share. It just so happens 103 00:05:00,620 --> 00:05:01,520 Adam Smith: that you've taken on a bigger position. 104 00:05:02,420 --> 00:05:04,840 Sean Aylmer: So in the Amazon, just so to round it out, 105 00:05:04,850 --> 00:05:08,630 Sean Aylmer: if the share price from Amazon goes from 4000 to 3000, 106 00:05:08,990 --> 00:05:12,020 Sean Aylmer: does the provider ask me for more money or how's 107 00:05:12,020 --> 00:05:12,470 Sean Aylmer: that work? 108 00:05:12,680 --> 00:05:16,270 Adam Smith: Yeah. So, no, they don't. So you will be or you 109 00:05:16,279 --> 00:05:19,250 Adam Smith: may be familiar with some of the changes to the 110 00:05:19,250 --> 00:05:22,159 Adam Smith: CFD product that have been introduced by ASIC (Australian Securities & Investments Commission) and 111 00:05:22,220 --> 00:05:24,770 Adam Smith: that happened back in March of this year. And it's 112 00:05:24,770 --> 00:05:29,029 Adam Smith: a really important thing to consider because CFDs are a risky product, 113 00:05:29,029 --> 00:05:31,849 Adam Smith: they're a leveraged product. So as I said, returns can 114 00:05:31,850 --> 00:05:34,460 Adam Smith: be magnified both to the upside and the downside. The 115 00:05:34,460 --> 00:05:39,740 Adam Smith: protections that ASIC have introduced include some really important protections for clients, 116 00:05:39,740 --> 00:05:43,130 Adam Smith: and one of which is negative balance protection. So now 117 00:05:43,130 --> 00:05:46,550 Adam Smith: if you're a retail client and you traded a CFD, you cannot 118 00:05:46,550 --> 00:05:49,279 Adam Smith: lose more than you invest. That's a really good thing. 119 00:05:49,490 --> 00:05:50,330 Adam Smith: That's a really good thing. 120 00:05:50,330 --> 00:05:52,969 Sean Aylmer: And that's a big difference to 10 years ago when 121 00:05:52,970 --> 00:05:55,970 Sean Aylmer: the global financial crisis CFDs didn't come out of that 122 00:05:55,970 --> 00:05:58,310 Sean Aylmer: looking real good. But part of the issue was the 123 00:05:58,310 --> 00:06:00,590 Sean Aylmer: fact that you could lose more than your, the capital 124 00:06:00,589 --> 00:06:02,270 Sean Aylmer: you put in, but you can no longer do that. 125 00:06:02,600 --> 00:06:05,120 Adam Smith: That's correct. And you're absolutely right. CFDs have a bit 126 00:06:05,120 --> 00:06:06,800 Adam Smith: of a checkered past and I sort of think of 127 00:06:06,800 --> 00:06:09,860 Adam Smith: them as the ugly duckling in the financial markets products yet, 128 00:06:09,890 --> 00:06:13,490 Adam Smith: but it's probably a little unfair because the product itself 129 00:06:13,610 --> 00:06:15,500 Adam Smith: is not the issue, it's the use of it and 130 00:06:15,500 --> 00:06:18,770 Adam Smith: the leverage that's been able to be offered to clients. 131 00:06:18,770 --> 00:06:21,530 Adam Smith: So the other thing that ASIC did, in addition to 132 00:06:21,529 --> 00:06:24,770 Adam Smith: introducing negative balance protections, was that they reduced the amount 133 00:06:24,770 --> 00:06:27,810 Adam Smith: of leverage that you can actually take on positions like this. 134 00:06:27,940 --> 00:06:31,219 Adam Smith: So before March this year, you could take a position 135 00:06:31,220 --> 00:06:35,180 Adam Smith: with 500 to one leverage. So for every dollar you invested, 136 00:06:35,180 --> 00:06:38,060 Adam Smith: you got five hundred dollars worth of exposure. Now, that's 137 00:06:38,060 --> 00:06:41,360 Adam Smith: to my mind and certainly Saxo's position is quite conservative 138 00:06:41,360 --> 00:06:44,839 Adam Smith: on this, that's an irresponsible sort of product that was 139 00:06:44,839 --> 00:06:46,880 Adam Smith: being offered to clients, because if you think about it 140 00:06:47,180 --> 00:06:50,160 Adam Smith: in a pure mathematical sense, that means your investment only 141 00:06:50,180 --> 00:06:53,720 Adam Smith: needs to go south, if you bought something by 0.2 of 142 00:06:53,720 --> 00:06:57,020 Adam Smith: one per cent before your capital is wiped out. That's a 143 00:06:57,020 --> 00:06:59,810 Adam Smith: pretty small margin for error. Yeah. And so if you've 144 00:06:59,810 --> 00:07:02,540 Adam Smith: been investing or trading for a while, you would appreciate 145 00:07:02,540 --> 00:07:05,150 Adam Smith: that markets don't go straight up and they don't go 146 00:07:05,150 --> 00:07:07,760 Adam Smith: straight down. They sort of, you know, they move around 147 00:07:07,760 --> 00:07:10,460 Adam Smith: over the course of the day. So your potential for 148 00:07:10,460 --> 00:07:13,370 Adam Smith: being closed out on a position like that is very, 149 00:07:13,370 --> 00:07:16,670 Adam Smith: very high. High probability of close out, so high probability 150 00:07:16,670 --> 00:07:19,790 Adam Smith: of loss making. So what ASICs done, again, which we're 151 00:07:19,790 --> 00:07:23,150 Adam Smith: fully supportive of, they've reduced the amount of leverage available in 152 00:07:23,150 --> 00:07:26,750 Adam Smith: these products. And that also is important for the uses 153 00:07:26,750 --> 00:07:28,760 Adam Smith: of the product, because a lot of people spend a 154 00:07:28,760 --> 00:07:32,179 Adam Smith: lot of time and effort analysing investment markets, trying to 155 00:07:32,180 --> 00:07:34,160 Adam Smith: work out where a good return might come from. And 156 00:07:34,160 --> 00:07:36,770 Adam Smith: so you need the product to be able to support you. 157 00:07:36,800 --> 00:07:40,520 Adam Smith: So previously, you know, frankly, you were rolling the dice, 158 00:07:40,520 --> 00:07:43,910 Adam Smith: but now it's a much better outcome for people who 159 00:07:43,910 --> 00:07:46,450 Adam Smith: like to do their homework and like to invest in 160 00:07:46,520 --> 00:07:49,970 Adam Smith: leveraged products because they can generate fantastic returns. They are 161 00:07:49,970 --> 00:07:53,180 Adam Smith: great diversifiers for portfolios, and they're also a great risk 162 00:07:53,180 --> 00:07:55,070 Adam Smith: management tool. So they've got many uses. 163 00:07:55,280 --> 00:07:57,020 Sean Aylmer: So just before we get into that, so it was 164 00:07:57,020 --> 00:07:59,660 Sean Aylmer: one to five hundred. What's the rule now from ASIC? 165 00:08:00,140 --> 00:08:02,780 Adam Smith: Yeah, look, it's pretty much so on a single stock, 166 00:08:02,810 --> 00:08:03,830 Adam Smith: it's one to five. 167 00:08:03,890 --> 00:08:06,410 Sean Aylmer: Right. So it's got to go down 20 per cent before you 168 00:08:06,410 --> 00:08:06,730 Sean Aylmer: lose your dough. 169 00:08:06,770 --> 00:08:10,130 Adam Smith: Correct. Exactly right. So that's my example before around Amazon, 170 00:08:10,130 --> 00:08:12,410 Adam Smith: the 20 per cent margin is actually where we are at 171 00:08:12,410 --> 00:08:14,800 Adam Smith: the moment for single stock, CFDs. 172 00:08:14,840 --> 00:08:15,200 Sean Aylmer: Okay. 173 00:08:15,230 --> 00:08:18,470 Adam Smith: Currencies are a little higher in terms of the leverage element, 174 00:08:18,470 --> 00:08:20,540 Adam Smith: but it's only around 30 or thirty three to one 175 00:08:20,540 --> 00:08:23,900 Adam Smith: from memory. So but that's because currencies are less volatile. 176 00:08:23,900 --> 00:08:26,450 Adam Smith: And I think that's also important to recognise is that 177 00:08:26,780 --> 00:08:29,420 Adam Smith: the Aussie dollar, US dollar pair is a lot less 178 00:08:29,420 --> 00:08:32,369 Adam Smith: volatile than the ASX 200 over time. 179 00:08:32,390 --> 00:08:32,610 Sean Aylmer: Yeah. 180 00:08:32,720 --> 00:08:35,070 Adam Smith: And so the way people think about this is you 181 00:08:35,070 --> 00:08:37,729 Adam Smith: want better protections around the risky assets, which is why 182 00:08:37,730 --> 00:08:41,080 Adam Smith: things like crypto are actually two to one. So it's 183 00:08:41,090 --> 00:08:44,510 Adam Smith: 50 per cent leverage as opposed to currencies, which might be, 184 00:08:44,510 --> 00:08:49,160 Adam Smith: you know, thirty three to one. Indexes, so ASX 200, NASDAQ, 185 00:08:49,250 --> 00:08:52,730 Adam Smith: S&P 500 from memory around sort of five to one, 186 00:08:52,730 --> 00:08:55,280 Adam Smith: and then stocks are 10 to one or the other 187 00:08:55,280 --> 00:08:55,880 Adam Smith: way round. Yeah. 188 00:08:56,270 --> 00:08:58,010 Sean Aylmer: Stay with me, Adam. We'll be back in a minute. 189 00:09:03,000 --> 00:09:05,819 Sean Aylmer: My guest this morning is Adam Smith, CEO of Saxo 190 00:09:05,820 --> 00:09:10,440 Sean Aylmer: Markets Australia. So are these mostly in the orbit of professional 191 00:09:10,440 --> 00:09:14,430 Sean Aylmer: investors or are there many sophisticated high net wealth investors 192 00:09:14,429 --> 00:09:17,490 Sean Aylmer: doing it? And are there many retail investors involving themselves in CFDs? 193 00:09:18,270 --> 00:09:20,880 Adam Smith: Yeah, lots of both, to be fair. So these protections 194 00:09:20,880 --> 00:09:23,550 Adam Smith: that ASIC have introduced are for retail investors, and that's a 195 00:09:23,550 --> 00:09:27,780 Adam Smith: classification that ASIC use. There is also a different class of investor called wholesale and 196 00:09:28,140 --> 00:09:29,670 Adam Smith: we can touch on those in a minute if you 197 00:09:29,670 --> 00:09:32,160 Adam Smith: want to. But yes, the answer to your question is 198 00:09:32,170 --> 00:09:35,340 Adam Smith: a very broad spectrum of clients use these products, and 199 00:09:35,340 --> 00:09:38,459 Adam Smith: as I said, for quite different reasons. So a lot 200 00:09:38,460 --> 00:09:41,370 Adam Smith: of clients at Saxo have equity portfolios that they want 201 00:09:41,370 --> 00:09:44,430 Adam Smith: to keep, you know, long term might. It might be an ASX portfolio, might 202 00:09:44,429 --> 00:09:46,590 Adam Smith: be a US portfolio. They don't want to turn them 203 00:09:46,590 --> 00:09:48,480 Adam Smith: over all the time. You know, it might be just 204 00:09:48,480 --> 00:09:50,220 Adam Smith: they've got a long term view or they don't want 205 00:09:50,220 --> 00:09:52,620 Adam Smith: to generate tax events, all that sort of stuff. So 206 00:09:52,620 --> 00:09:56,070 Adam Smith: they'll use CFDs to hedge, as you mentioned before, against 207 00:09:56,070 --> 00:09:59,069 Adam Smith: currency movements. If you've got a US dollar asset, so 208 00:09:59,070 --> 00:10:02,010 Adam Smith: you own Amazon or Apple or Netflix or whatever, you're 209 00:10:02,010 --> 00:10:04,290 Adam Smith: exposed to the movements in the Aussie dollar. So you 210 00:10:04,290 --> 00:10:08,700 Adam Smith: might take out a currency CFD to hedge your position there. Similarly, 211 00:10:09,059 --> 00:10:11,729 Adam Smith: there are other opportunities in the CFD world, and I think 212 00:10:11,730 --> 00:10:15,270 Adam Smith: that's the beauty of the product, is that it democratises investment. 213 00:10:15,280 --> 00:10:18,809 Adam Smith: So retail clients, who typically might not have the capital 214 00:10:18,809 --> 00:10:22,740 Adam Smith: base that wholesale or professional investors do, can access these 215 00:10:22,740 --> 00:10:27,390 Adam Smith: markets and can access investment ideas and opportunities again, that 216 00:10:27,390 --> 00:10:30,420 Adam Smith: they may have come about through their own analysis or 217 00:10:30,420 --> 00:10:33,000 Adam Smith: they may have read about. So I look at things 218 00:10:33,000 --> 00:10:35,460 Adam Smith: like gold. Gold is a great example. Like not many 219 00:10:35,460 --> 00:10:37,440 Adam Smith: people can afford to go out and buy a gold bar, 220 00:10:37,740 --> 00:10:40,740 Adam Smith: but you can buy a gold CFD for a fraction 221 00:10:40,740 --> 00:10:43,860 Adam Smith: of the price. And it can be a better alternative 222 00:10:43,860 --> 00:10:47,069 Adam Smith: than an investment in a gold stock, because you don't 223 00:10:47,070 --> 00:10:49,500 Adam Smith: know which company is the best company. You may not 224 00:10:49,500 --> 00:10:51,630 Adam Smith: have the time nor the inclination to work that out. 225 00:10:51,660 --> 00:10:53,939 Adam Smith: You just want a pure exposure to gold and so 226 00:10:53,940 --> 00:10:56,340 Adam Smith: you can go and buy a gold CFD. And that 227 00:10:56,370 --> 00:10:59,040 Adam Smith: means that you can fractionise your investment so you can 228 00:10:59,040 --> 00:11:01,170 Adam Smith: buy as much as you want. And at the end 229 00:11:01,170 --> 00:11:03,330 Adam Smith: of the day, I think the thing to remember with 230 00:11:03,330 --> 00:11:06,290 Adam Smith: these types of products is you need to do your homework, 231 00:11:06,300 --> 00:11:07,740 Adam Smith: you need to manage your risk. You need to be 232 00:11:07,740 --> 00:11:11,010 Adam Smith: able to sleep at night. So if your investment threshold 233 00:11:11,010 --> 00:11:13,230 Adam Smith: is a thousand dollars. These products allow you to go 234 00:11:13,230 --> 00:11:15,090 Adam Smith: and buy a thousand dollars worth of gold, if it's 235 00:11:15,090 --> 00:11:17,810 Adam Smith: ten thousand, fantastic. If it's a hundred thousand, even better. 236 00:11:18,179 --> 00:11:21,689 Sean Aylmer: Okay. And the other thing I often think about investing 237 00:11:21,840 --> 00:11:24,330 Sean Aylmer: with CFDs is you need to be an active investor, too, 238 00:11:24,330 --> 00:11:25,980 Sean Aylmer: so they're not set and forget products. 239 00:11:26,580 --> 00:11:28,920 Adam Smith: Well, I disagree a little bit there, because I think 240 00:11:28,920 --> 00:11:31,860 Adam Smith: they can be and because, again, it's about the amount 241 00:11:31,950 --> 00:11:35,640 Adam Smith: of risk or exposure or leverage that you want to take. 242 00:11:35,670 --> 00:11:38,280 Adam Smith: So we have a lot of clients that will take 243 00:11:38,280 --> 00:11:41,370 Adam Smith: a small position in a stock. And again, they'll look 244 00:11:41,370 --> 00:11:44,640 Adam Smith: to see how the stock performs over time. And it 245 00:11:44,640 --> 00:11:46,829 Adam Smith: forms a part of their portfolio. They may then add 246 00:11:46,830 --> 00:11:49,980 Adam Smith: some more. It can be Aussie stocks. It can be CBA, BHP, 247 00:11:49,980 --> 00:11:51,840 Adam Smith: it can be anything overseas as well on the US 248 00:11:51,840 --> 00:11:55,530 Adam Smith: markets and internationally. So it's not necessarily just the domain of 249 00:11:55,530 --> 00:11:57,569 Adam Smith: the day trader. We have a lot of clients who have 250 00:11:57,570 --> 00:12:01,530 Adam Smith: built portfolios around CFD products and single stock and index 251 00:12:01,530 --> 00:12:04,890 Adam Smith: CFDs as well. So the product lends itself to each style 252 00:12:04,890 --> 00:12:08,729 Adam Smith: of investing, whether it's short term trading, long term investment horizons. 253 00:12:09,059 --> 00:12:10,950 Sean Aylmer: I've learned a lot this morning. Thank you, Adam. Thanks 254 00:12:10,950 --> 00:12:11,429 Sean Aylmer: for talking to Fear and Greed. 255 00:12:12,540 --> 00:12:13,290 Adam Smith: It's been a pleasure. Thank you. 256 00:12:13,559 --> 00:12:17,220 Sean Aylmer: That was Adam Smith, Chief Executive Officer of Saxo Markets Australia. 257 00:12:17,460 --> 00:12:19,470 Sean Aylmer: This is the Fear and Greed Daily Interview. Join me 258 00:12:19,470 --> 00:12:21,720 Sean Aylmer: every morning for the full Fear and Greed podcast with 259 00:12:21,720 --> 00:12:24,569 Sean Aylmer: all the business news you need to know. I'm Sean Aylmer. 260 00:12:24,570 --> 00:12:25,380 Sean Aylmer: Enjoy your day.