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I’ve noticed when I do events that people are very interested in spread betting. But they are very scared when it comes to actually giving it a try.
“Isn’t it like betting? They say. “I don’t want to bet, I want to invest.”
And so investors in particular tend to shy away from it.
I think they are wrong.
I use spreadbetting as a spreadinvesting account. Just like my ISA. I don’t need to take wild bets in bitcoin or commodities, it just means I can invest more money tax free.
if you have a decent amount of money (obviously most ADVFN readers are extremely rich) and you’ve only got the 20k tax free ISA allowance, spreadbetting is a great way to invest tax free.
If you are scared, the main thing to think about is don’t get caught up with the word “betting”. After all, every trade made in any form is really a bet! With spreadbets there is actually very little difference to a trade within a tax free ISA.
Say you wanted to buy 1,000 shares in Barclays but had run out of cash in your ISA. Then you can buy 1,000 shares tax free spreadbetting instead.
The difference with a spreadbet is the staking. So £10 a point is the same as 1,000 shares.
Just like an ISA you can hold the trade for as long as you want. Profits are tax free. You get the dividends!
When you make the trade you pay some small extra spread but there is no commission or stamp duty.
You can buy a “far out” spread with many companies so there is no extra cost for many months, or you can buy a daily which just rolls over every day costing usually a few pence per night.
I use spreadbetting extensively together with my ISA.
Dangers? You could potentially use the small leverage still allowed (in effect you can stake more than you have in the account) and play with money you don’t have. But with new regulations you can’t run into negative balances as the firms are forced to close you out before that happens.
Potentially it could push you into gambling if you have that tendency.
But otherwise we are very lucky to be allowed to do it at all!
For more on how to invest tax free read my Naked Trader Guide To Spreadbetting edition 2 which covers using spreadbetting to invest.
I am also holding a spreadbetting seminar in March teaching how to do it, with a spreadbet firm in attendance for part of it to take questions directly. E-mail me at robbiethetrader@aol.com if interested.
