I'm trying to learn about stock markets. I eventually want to invest a small amount over a long period. Yet, I notice on a lot of broker sites that they tend to charge an overnight fee for any stocks held over night. I presume this is every night thereafter?
I just wondered because it seems like a wall when you want to let your stock price grow, and an overnight charge eats into this. or, is this only the case for "CFD" stocks? I'm confused.
Any help?
Cheers
If you are trading CFDs, which are usually traded on margin, you will usually be charged an overnight financing fee for long positions held overnight and you will receive an overnight financing credit for short positions held overnight.
Most CFD brokers will have their overnight financing rates set at + or - 2.5% or 3% from the country's official interest rates. So if your country's official interest rate is 5% and your broker uses + or - 2.5%, you will get a 2.5% credit for any short positions held overnight and pay 7.5% fee for any long positions held overnight.
In Australia the official interest rate is 2.5%, so I get 0% for short positions and pay 5% for long positions held overnight.
If you are looking to hold positions open long term (especially long positions) you might think twice before using CFDs to trade as you may end up paying quite a bit in interest over a long period of time. These financing fees are charged because you are borrowing the funds to open your positions, If you buy shares directly you would not be charged such overnight financing fees.
