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Benjamin Schmitz

Why should I spread bet?


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Trading the financial markets is increasingly popular, however, trading your own account comes with a degree of risk but if it is managed appropriately you may find there are certain advantages. Experiencing the ups and downs of market trading can give you an insight into the work of the institutional investors, people like those that are managing your pension. It’s worth keeping this firmly in mind as institutional investors will likely have a more conservative risk-return ratio than most retail investors. Part of the reason that retail investors blow up so frequently is because trying to gain big returns is a risky business. One mind-shift to consider is asking yourself if you had to make a 10% return over a year – how would you do it. It’s highly likely you’d trade less frequently and with greater discipline and these would be two immediate steps in the right direction. There are a lot more educational elements relating to trading. Online there is high-quality material that is free and interesting to read. Even if you don’t actually trade off the back of the information it can help you gain an improved understanding of the markets. More steps in the right direction. The above reasons are all valid and making money never went out of fashion, and some traders do make a living out of trading. That may not be your ultimate aim and the many stories that are shared about taking that path invariably mention hardships on the road to success. Spread betting involves certain features that make it a unique way of accessing the financial markets. It involves placing a ‘bet’ on whether an instrument/market is going to rise or fall. You also have to determine your stake size which acts as a multiplier of your profits or losses per change in unit price. An interesting twist is that spread betting sits in a disputed area somewhere between investing and gambling. According to reports, the Financial Conduct Authority in the UK continues to review the situation and is considering applying new guidelines and regulations. While the dust settles, spread bet accounts can continue to trade in financial markets and to buy UK stocks and not have to pay Stamp Duty Reserve Tax of 0.5%. SDRT would apply if you were buying the stock on a ‘delivery vs. payment’ basis.

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