Want to Beat the Market? Then Spread Your Bets – Financial Spread Betting
Some investors prefer to hold stocks for years at a time, but if you see yourself trading on a frequent basis, it is worth considering finance betting because spread betting providers usually charge very low commissions. Moreover, because with a spreadbet you are not actually buying the physical stock itself, you don’t have to worry about paying any custody costs. This is the fee that may be charged by your broker or bank to hold a share on your behalf and is usually levied as part of your monthly account cost.
“These high-risk speculative products can make you a fortune or lose everything you have if you aren’t careful with money management. Just £1000 can transform into £10,000 in the blink of a share market index if you use extreme leverage (not recommended!), or just as quickly turn into a $10,000 debt if you don’t use stops. You see, spread bets allow traders and investors to bet on the difference between the price of something today and the price of it tomorrow, or next week, or the next couple of months. They take a trade, which really means punt, about which way the share price, currency pair or index market is going to go – either up or down. If you’re right, crack open the bubbly. If you’re wrong, and you don’t use stops – it’s the poor house.”
Another advantage of trading stocks using a financial spread betting account is the way dividends are accounted for. These are paid out by companies listed on an exchange twice a year to their shareholders out of their profits for that year. If you are holding a spreadbet, while you do not own that company’s shares, you can still receive the economic benefit of the dividend. Most spread betting providers will credit your position in that company with 90% of the value of the dividend you would have received had you been holding the physical shareholdings.
Finance betting is one game where the bookies don’t mind if clients win. Why? Partly, to to the fact that spread betting providers profit by adjusting their spreads and by constantly trading in the underlying markets to hedge client’s positions. More often than not, they end coming out ahead. Last year, for instance, the markets experienced a general recovery from the market depression post the credit crunch crisis, yet IG still had a record year.
“Financial spreadbetting can be a cost-effective way to speculate on share prices over the short term, be it days, weeks, or sometimes even months.”
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