The Pros and Cons of Financial Spread Betting

Most people believe that it is just pure luck that some strike it rich with their spread bets. However, I must assure you this is just a myth. To be successful in financial spread betting one does indeed need a bit of luck and a lot (I emphasize) of hard work and due diligence. There are undoubtedly numerous advantages and disadvantages when it comes to this derivative product of which we will discuss a few notable ones which are discussed below.

The first advantage and I suppose most prominent one is that the returns are tax free. You don’t have to pay anything to the government in terms of stamp duty or any other obligatory payments to buy spread bets – The profits that you reap are also similarly tax free. The government cannot levy any taxes because there is no actual sale of goods that is taking place. Although there is a small betting tax that amount to 3%, it is concealed in the spread by the betting company. Please note this is at the time of this article.

The second advantage is the spread bets are easy to understand and learn even for someone who has had no prior experience or learning in this field. Most other financial instruments require extensive study which may take a lot of time. You should still understand how financial spread betting works, and realize there is risk involved.

Spread betting companies operate according to the stock market and therefore is open and functioning practically all the time. You can therefore trade your stocks after your working hours and even on holidays. This provides flexibility for those who have regular working hours and wish to earn more. You don’t need to be physically present to make your bet; therefore this provides a great work from home opportunity. You can place your bets in any of the large number of stock market indexes that are accessible to your betting institution. The greatest disadvantage associated is that you can lose your money! Due to the ability to trade on margin, you are not betting all your capital which gives traders a false impression. If not carefully monitored one can lose your investment plus, the losses can be many times more. Most of the traders find it difficult to outlast the first year due to these losses. Heavy losses can make even the smartest person desperate to reinvest without thinking logically which is why many investors have lost everything they owned to debt.

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