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Emerging Markets

Modern Investing: How CFDs Are Changing the Game

 4 min read / 

Ever since the financial crisis 9 years ago, the traditional broker industry has seen a continued exodus of clients moving assets in increasingly passive funds. Now, with the popularity of CFDs increasing, the economy is seeing the next big shift from close consumer relationships with brokers to phone apps which require little to no interaction with other people. The growing importance of these innovative financial instruments is changing the game, and it is paramount that brokers and investors alike learn more about the new possibilities they offer.

Historically, investors in the stock market were wealthy individuals who invested through brokers. The fees charged by the brokers were too high for lower-wealth individuals, which made it difficult to find out about the stock market and subsequently put money in it. In the last few decades, however, more flexible vehicles for investment have become popular, widening consumer access to investment and the variety of methods in which they do so. This has been supported by the increasing access to free financial information on the internet, through sites like Yahoo Finance.


Contracts for Differences (CFDs) make it easier for more casual investors to profit from the stock market. Designed in the 1990s, a CFD behaves like the asset underlying it; in that, someone can buy a CFD of a share of Amazon, and it will mirror the price of the share exactly. This framework allows for a simplification of the market, smaller fees and it can even pay out dividends to the holder. The main difference compared to buying a share is that the holder does not own part of the company bought, they simply make or lose money depending on how the price of the share changes. This means that the company offering the service does not have to adhere to the strict regulations associated with buying stocks, leading to lower fees.

In addition, CFDs also make it possible to leverage trades. This means that buying a stock that later increases by 10%, with a leverage of 10, will give a Return on Investment of 100%. This leads to greater potential returns, although this can also lead to larger potential losses, so great care must be taken when using these contracts. CFDs also facilitate investment from low-income individuals by enabling them to stake any amount. Shares can only be bought in integer amounts- for example, an investor wanting to buy shares valued at £200 with a £500 fund would only be able to buy 2 shares. With CFDs, as any amount of money can be invested, those with less capital have the opportunity to buy expensive stocks that they had previously been priced out of.

Traditional brokers were the first to offer CFDs, but they made extra revenue by offering a spread when buying and selling the contract. This meant that the client would pay more than the market price when buying, and would sell for less than the market price, affecting profits. Recently, however, some smaller companies offering CFDs have decided to remove the spread and offer the contracts at the mid-price with low fees.

New Offerings

One of the new companies offering this type of investment tool is an app called BUX, which is currently available in the UK, the Netherlands, Germany, Austria, and Italy. The app can be downloaded on Apple and Android, and the interface is simple and easy to use. After the initial onboarding, the user’s account is a ‘funBUX’ account, which uses a fake, in-app currency that allows people to trade exactly as though they were using real money. This lets users get used to the interface, the process of investing and the volatility of the markets.

Once a user feels comfortable with the app, they can put real money in, and trade with fees of either 0.1% or £0.25 per trade, whichever is the larger amount. This is much cheaper than a normal stock broker would offer, which can range from £5 – £200 depending on the service provided. This allows people with funds of just £50 to trade in the stock market, without fees being a barrier to entry. The app also allows for trading on a variety of different assets: popular stocks, indices, commodities, currencies and now even Bitcoin. This diverse offering provides a lot of flexibility and options for the app’s one million customers, making it even more appealing.


Overall, CFDs are becoming increasingly important for individuals who are interested in the stock market but only have small amounts of capital to invest, such as students. The combination of low fees with the power to be able to open and close trades at the touch of a button means CFDs are only going to increase their influence in modern investing.

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Venezuelan Digital Currency Backed by Oil

 2 min read / 

Venezuelan Digital Currency

The Story

Venezuela has announced plans to launch a digital currency, “the petro”, backed by the country’s oil and mineral reserves. The petro aims to help ease the country’s monetary crisis but sceptics claim the proposal has no credibility and will not help those in extreme need.

Why It’s Important


Hyperinflation has eroded the Venezuelan bolivia’s value by 97% this year, making imports incredibly expensive and causing many to abandon trust in the currency. The country’s oil reserves made up 95% of its exports in 2016, while oil and gas extraction accounted for 25% of GDP. Rich supplies of resources provide some initial credibility to the proposal, but President Maduro’s questionable track record when it comes to monetary policy is making many sceptical about the proposal. His currency controls and money printing have only added to the monetary crisis. Maduro has not announced when the digital currency would come into use or any details regarding how the country would create such a system.

Opposition leaders argue the country’s shortages of food and medication are far more pressing and that the digital currency will not address this. The digital currency may provide a more trusted medium of exchange, but it is unlikely to help those in excessive poverty.

Keep reading |  2 min read


Venezuela’s Inflation Is at 4000%. Here’s Why

 2 min read / 

Venezuelan Digital Currency

Venezuela’s currency, the bolivar, has lost 96% of its value this year. As the currency becomes near worthless, imported food and medicine are in short supply. A humanitarian crisis is unfolding.

The government and state-owned oil company, PDVSA, owe bondholders $60bn alone and have recently defaulted on debt repayments. More defaults could mean investors seizing their stake in Venezuela’s oil.

Why Is Venezuela in Debt?

Acting upon the country endowment of natural resources made it an economic success in the mid-2000s.

Yet, while the price of oil skyrocketed during the late-2000s, former President Hugo Chávez matched this with Venezuelan public debt.

Once the price of oil dived in June 2008, lenders stopped extending credit to the country.

Oil – price per barrel; Source:

Venezuela’s Inflation

The recent defaults have caused Venezuela’s inflation to rise astronomically.

Defaults on government bonds are largely to blame for this inflation.

In 2016, OPEC found that oil reserves accounted for 95% of the country’s exports, while the oil and gas extraction combined made up 25% of its GDP.

Venezuela’s overdependence on oil and lack of saving during its heyday are the leading causes of the current crisis.

Keep reading |  2 min read

Emerging Markets

The Psychology Behind Saving

 4 min read / 


The idea that the poor do not save enough money just because they are simply “too poor to save” is wrong.

Gambian farmers have in the past saved in cash (wooden lockboxes with savings were smashed open in an emergency or once the savings goal was reached), stored crops, and consumer durables. Saving in livestock and jewellery enabled other farmers to convert cash into less liquid assets to prevent unwarranted and frivolous spending. A detailed household survey conducted in 13 countries found that for many people in the developing world saving may be counter-intuitive. The poor and the extremely poor, those living on less than $2 a day and on less than $1 a day, respectively, do have a significant amount of choice in regards how to spend their money.

The Developing World

The poor do not use all of their income to buy calories, but only allocate between 56% to 78% to food. Spending on tobacco and alcohol (considered non-essential and nonfood items), and festivals (weddings, funerals or religious events) plays a significant role in household budgeting. For example, the poor in rural areas of Mexico spent slightly less than half the budget on food, and 8.1% on alcohol and cigarettes. The poor and the extremely poor spend about the same on food, which suggests that the extremely poor feel no extra compulsion to purchase more calories. Instead, the remaining income is often saved across a variety of informal saving groups, including peer-to-peer banking and peer-to-peer lending.

It is often the poor, women and the rural communities who are the least banked (those without an access to formal banking services). Not surprisingly, without an access to savings accounts or other formal financial services, it is difficult for families to manage unexpected risks, like illnesses, or plan children’s education. But the desire to save and engage with financial services is still there, as shown by a large uptake in the savings plans in Kenya despite high-interest costs, high withdrawal fees, and close to negative interest rates.

Yet, inchoate financial infrastructure in the developing world cannot on its own explain undersaving. Behavioural economists argue that the poor are no different to the rich in their saving habits: both groups are subject to cognitive biases and inherent human irrationalities and face self-control problems. When it comes to saving, “present bias” (or procrastination, proverbially) occurs when people give stronger weight/preference to an earlier option or purchase that provides instant gratification, rather than setting some funds aside for emergency use. Due to income uncertainties, however, the consequences of this “live for today” behaviour are far more detrimental to the poor than on the rich.

The Developed World

Undersaving is not exclusive to the developing world. Household saving rates, the difference between disposable income and consumption, vary greatly across the world. In 2017, Switzerland and Luxembourg, closely followed by Sweden, are the three countries with the highest savings rates. However, a higher GDP per capita does not necessarily equate to a higher savings rate.

In other words, people with higher income in the developed world countries do not always save more. Consider the US with GDP per capita $57,466 and savings rate of 5.3% and the Czech Republic, GDP per capita $35,127 and a savings rate of 6.7%. Similarly, with GDP per capita of over $43,000, the UK’s household savings rate was 3.3% in 2016, the lowest level since 1963, while in Hungary ($27,008 GDP per capita) the savings rate has been on average 4.5% in the past three years.

Final Thoughts

Is it possible to fully comprehend the monetary hurdles of low-income families? Undoubtedly, consuming today might be a rational choice and a necessity to survive. But, biases deserve context. For many in the developing world saving at home still remains hard. Technological innovation in finance and growth of electronic wallets have already alleviated some of the hurdles of saving money, but technology is not the silver bullet that will address undersaving. An active and conscious commitment to saving and awareness of biases could have a strong beneficial impact on the lives of the poor.

Keep reading |  4 min read


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