Investment Trading with a healthy Risk Appetite?
One of the so-called high-risk investment trade types, financial spread betting allows regular people to trade on the markets with a relatively small amount of capital. A standard contract size is £10 and the investor may choose his or her own stake size – so you could go with £2 a point. Spread betting is a leveraged trading tool which gives an investor the chance to trade the financial marketplace while never actually taking physical ownership of the underlying instrument. The bet is settled as the difference between the purchase and the sell price of the contract.
There is no capital gains tax charged on profits, making spread betting a highly popular for investors. In addition, there is no stamp duty on transactions – because in strict terms the transaction is a ‘bet’ and not an investment. This has caused spread betting to be likened to, or even classed as a type of online gaming. However, it is fully regulated by the Financial Services Authority (FSA) and is therefore not purely a sport! That said, spread betting is could certainly be seen as being higher in risk than more conventional investment tools as the investor is less protected against loss. For instance, the risk exposure to a large loss on your capital is large – especially if you do not order a stop loss on your bets. The tighter the spread, the less costs are involved, because the costs are included in the spread. Therefore, it is always a good idea to check the spread offered by various spread betting companies. Spread betting is certainly too high risk for some people – as the investor is merely speculating on the movements in the market rather than actually investing in the underlying instrument. Yet there are some who might say that investing in a share because you hope it will make a profit is very similar to betting on a share price – for exactly the same reason.