Advantages And Difficulties Of Financial Spread Betting

To many investors, financial spread betting is one of the most appealing ways of investing

. For one, you do not need to pay tax for the profits that you get based on your capital gains, in which you will need to pay if you are using the conventional share trading. You also do not need to pay for stamp duty when you make transactions, as in this case, we are betting, and not making an investment. Despite these advantages, this is more risky when compared to the conventional one like fixed odds betting or share trading in which have more protection over them. Should you make a wrong bet, you will lose even more if there was no presence of a stop loss. Whatever losses you experience on spread bets, you will not be able to make up for the capital gains with ordinary investments.

How much you pay depends on the spread, which is the difference between the bid and its offer price. As this is so, a wider spread requires you to pay more as compared to a narrow one to trade. Thus, when you decide on which company you would want to spread bet on, be sure to compare the spreads. On the bright side, incidentally, competitions are rising as more investors have been introduced to this type of betting, and are happy with it. Due to this, the spreads are becoming narrower.

However, there are still a lot of people who perceives financial spread betting to be extremely risky. With the word bet in its name, people have negative connotations towards it, questioning the morals of betting instead of investing. Yet, the idea between investing and spread betting is rather alike than different. They both aim to gain profits. You buy because you think that the price would go up. The one big difference between the two is that you need to have much money to pay for a share, while betting requires less money. Furthermore, in investing, your losses can be extremely large within the day if your predictions go awry. This means possibly losing the whole investment you had bought. On the other hand, with spread bets, if you put a stop-loss limit, your loss will only be the amount that you had determined. In contrast, your wins can be endless.

by: Chris Cornell

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