Compare Spread Betting - Pros And Cons
Compare Spread Betting - Pros And Cons
Spread betting is where investors don't really invest in equities. Rather they would only bet or speculate on the prices of the equities. The company would make a bid price for a particular stock and investors would only have to speculate if the price in the coming days would go up or down and then bet a particular amount per every dollar or drop or rise that the investor is predicting. Spread has some pros and cons.
Tax benefits
In traditional stock trading, there are taxes like Capital Gains tax that you need to pay. In fact there is stamp duty of about 0.5% on all the share purchases as well. However, spread betting on the other hand is free of tax because it is just a contract between the betting company and the investor and there isn't an actual exchange of shares taking place. The only time there is a tax is the 3% tax on the gross profits of the spread betting company which is eventually absorbed in the spread.
Comprehending
Some of the financial instruments are very hard to understand before you can make an intelligent guess and invest money trying to make money. However, spread betting doesn't involve complications and you only have to know about the stocks to be able to speculate whether the prices are going up or not.
Win and loss could be quick
This could be a great advantage as well as a disadvantage of spread betting. There are some dangers in being careless and betting large amounts of money. This is because just like you can win 10 times your investment very quickly you can lose large amounts as well, if you are not really careful. In stock trading you can only lose as much money as you have invested. However, there are no limits on betting. That means just like your wins are magnified a few times, your losses too would be magnified a few times. You can even lose your initial deposit and all your capital.
The cost of funding
Sometimes the cost of funding for huge speculations is more than what you would have gained by avoiding the stamp duty. If you are holding long positions that will last more than a few weeks, the funding costs will become quite high.
No special benefits
In spread betting you are only speculating on the costs of the stock of a particular company. However, you don't own the shares or any other financial instruments for that matter. As a result you don't get any special privileges like dividends or voting rights which are provided to the stock owners.
Gambling activity
One of the reasons why spread betting isn't taxable is because it is considered by the FSA as a gambling activity. That means that unlike an investment,betting in the longer run would lead to more people losing rather than winning. So, you have to be smart and careful when you choose to go for compare spread betting.
Tax benefits
In traditional stock trading, there are taxes like Capital Gains tax that you need to pay. In fact there is stamp duty of about 0.5% on all the share purchases as well. However, spread betting on the other hand is free of tax because it is just a contract between the betting company and the investor and there isn't an actual exchange of shares taking place. The only time there is a tax is the 3% tax on the gross profits of the spread betting company which is eventually absorbed in the spread.
Comprehending
Some of the financial instruments are very hard to understand before you can make an intelligent guess and invest money trying to make money. However, spread betting doesn't involve complications and you only have to know about the stocks to be able to speculate whether the prices are going up or not.
Win and loss could be quick
This could be a great advantage as well as a disadvantage of spread betting. There are some dangers in being careless and betting large amounts of money. This is because just like you can win 10 times your investment very quickly you can lose large amounts as well, if you are not really careful. In stock trading you can only lose as much money as you have invested. However, there are no limits on betting. That means just like your wins are magnified a few times, your losses too would be magnified a few times. You can even lose your initial deposit and all your capital.
The cost of funding
Sometimes the cost of funding for huge speculations is more than what you would have gained by avoiding the stamp duty. If you are holding long positions that will last more than a few weeks, the funding costs will become quite high.
No special benefits
In spread betting you are only speculating on the costs of the stock of a particular company. However, you don't own the shares or any other financial instruments for that matter. As a result you don't get any special privileges like dividends or voting rights which are provided to the stock owners.
Gambling activity
One of the reasons why spread betting isn't taxable is because it is considered by the FSA as a gambling activity. That means that unlike an investment,betting in the longer run would lead to more people losing rather than winning. So, you have to be smart and careful when you choose to go for compare spread betting.
For more information on Spread betting and compare spread betting tips you could visit spreadcompare.co.uk
Article Source: http://EzineArticles.com/?expert=Sagbee_C
Belum ada Komentar untuk "Compare Spread Betting - Pros And Cons"
Posting Komentar