What does CFD mean when I try to buy SPX500 on eToro?

I’m new to investing, and I heard from smart people on the internet, that the best beginner strategy to investing is to just consistently invest into S&P 500 in a regular basis. Armed with this knowledge, I made an eToro account and bought into this index. When I made the trade I saw there’s CFD text on it, which I didn’t see when I looked at trading Tesla, or Microsoft.

I saw on your site that a huge number of CFD traders lose money, which gets me confused. It also looks like I’m getting charged a weekly fee due to the index I bought being a CFD.

Is this fee normal when investing in indices? Can I avoid it somehow as a European citizen?

Hey there,

thank you for your comment. First of all, CFD products are mainly for speculation and are not great tools for investing. The product you sent me is a CFD and not For example, CFDs are leveraged products, and using leverage has a cost (called funding fees or overnight fees), which is charged every day. Holding a CFD for a year could cost even 7-10% per year.

Rather, ETFs would be great for long-term investing and that’s the most typical way how people invest in the S&P 500. You can find ETFs at eToro if you click on this link: https://www.etoro.com/discover/markets/etf So if you use these ETFs, you wouldn’t have that fee that is charged at CFDs.

If you have any other questions, please let me know.

Best,
Adam