Are you familiar with Financial Spread Betting? According to Investopedia, Financial Spread Betting is defined as follows: “Financial Spread Betting, unlike traditional investing, is actually a form of betting. Unlike fixed-odds betting, it does not require a specific event to happen. You can actually close in the bet at any time and take home the profits or limit the losses. FSB is a margined derivative product that allows you to bet on the price movements of all kinds of financial markets and products, such as stocks, bonds, indices and currencies, etc. An investor can get into long (similar to buying a share) or short (like selling a share) bets depending on the prediction or direction the market moves.”
Financial Spread Betting has risks as well as rewards for those who chose this type of financial speculation. This article will provide you with further details on the topic.
Rewards of Financial Spread Betting
- Tax Free Gains – One of the biggest rewards of Financial Spread Betting is the capital gains are tax free. It might sound like a dream come true to have gains and not pay taxes on them. This happens because with a spread bet, there is a contract between the client and spread betting company. There is no actual physical exchange of shares that happen during the transaction.
- Easier to Learn – Financial Spread Betting is one of the easier forms of investing to understand. Since you are actually betting on what might happen, you do not have to remember the rules and regulations of other types of investing instruments.
- Commission Free – In most cases, all the costs incurred during Financial Spread Betting are built into the bid-offer spread so you don’t have to worry about paying additional commissions to a broker. When you use a traditional broker, that broker charges a fee to buy and sell the shares for you. This is not the case with Financial Spread Betting.
As with anything that provides a reward, there are always risks involved. Here are a few of the most common risks to look out for.
Risks of Financial Spread Betting
- Loss of Funds – There is the opportunity to earn a lot of money with Financial Spread Betting, but there is also the risk of losing it all plus more if you do not know what you are doing. Make sure you fully understand how Financial Spread Betting works, before you start. Start with smaller amounts to get used to it before diving in and betting huge amounts or more than you can afford.
- Markets are Volatile – If you like comfort and security with investing, be careful of how much money you tie up in Financial Spread Betting. The markets tend to be very volatile and can move up or down very suddenly. For some people this is exciting, but for others it can be scary. Pay attention to how you feel about this to know how much or little to bet.
- No Breaks for Losses – Since Financial Spread Betting is not taxable, there is no tax break for losses that you may incur as a result. So if you bought at a low price and sold later that same tax year to hedge your stock portfolio, you will not receive any break for your losses.
I could go on into more detail but this article has only covered a few of the many topics available on the subject. There is a lot to consider before starting Financial Spread Betting and if you would like to learn more about it, visit ETX Capital for more information.