Does anyone have an opinion on the xstocks available on Kraken?
I’m currently doing dynamic DCA with VOO on Interactive Brokers, thanks to the information I found on the blog. I also use Kraken for crypto. But recently, Kraken started offering investments in different “traditional” stocks, like Microsoft, Nvidia, or even the S&P 500 or VTI. With xstocks, you don’t technically own the actual stock, even though it’s held by a third-party company. But you still receive dividends (which is the most important thing on the long run)
So here’s my question: since IB’s interface is quite complex, while Kraken Pro is super user-friendly, why not just move everything over to Kraken to make things simpler?
You may as well buy my jStocks, super simple Bank transfer or Crypto transfer DCA every month. I then replicate what you buy. Guaranteed return, low fees.
Joke aside, it’s a bet to escape system A (stock exchange) to buy something on system B (blockchain) while the underlying is still traded on A. And you’re out of whatever security brought by “the system”, if any. It’s a derivative with all its complexity and risk… offloaded to an unregulated exchange.
IMHO it’s non sense, as if you would buy BTC on the stock exchange..mmmh… wait. Finance’s definitely screwed…
You could also see those xstocks as a RWA that you trade to make money and get dividends. In that perspective it’s not very different than owning a stock on IB, don’t you think?
Other than that, does anyone think it could be a good way to invest on the long run and simplify the process?
If that is the only reason: Why not look for a broker that is simpler than IBKR but still allows real stock trading? Some say Degio is easier (never used it myself), and then there’s Neon, Yuh, Saxo, Swissquote, etc. To me, it’s “super user-friendly” sounds like the wrong motivation.
It’s basically the equivalent of a CFD, but with more counterparty risk, PLUS the risk of not being able to sell your tokens in the future if the various service providers involved cease to exist.
It’s the same principal as stablecoins.
While I would see benefits in actual securities being issued as blockchain tokens that can be held in self-custody and transacted without any intermediary, the tokens you are talking about are not that. They require trust in service providers and have counterparty risk. They bring absolutely no benefit over genuine securities, that I can think of, but simply add more layers of risk.
You’re right, the interface should not be the only important thing. I have to say I’m also a bit afraid of the taxes thing. It’s my first year so I haven’t dealt with them yet, but I’ll have to make it happen in a few months. I’m a swiss citizen, do you have experienced in that matter?
Except it’s really not a rwa (real world asset I guess?), but a contract based on the performance of an “external” asset no one owns (otherwise you would be creating shares out of nothing on a parallel exchange), with all the parties and inherited risk they carry to build the product, as well-described by @Daniel.
On classic exchanges, CfDs, AMCs, Swaps are products you can use to have the performance of an underlying asset without owning it, nor does the issuer. It’s a contract between parties to give a value based on the performance of XYZ. If one fails in the chain, you may lose it all. Add to that, unregulated blockchain trading, that has two implications:
the issuer and market are not regulated so potentially more exposed to defunct (FTX etc.)
Regulation eventually comes into play and kills the product.
Not directly with stock tokens, but I have other security tokens (blockchain-based bonds) that I’ve held for quite some years now. I declare the interest as income and the value of the tokens as wealth using the annual statements provided by the issuers. Haven’t had any issues so far. In the case of stock tokens that would be dividends as income, and the value of the tokens as wealth.
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