Financial spread betting firms offer a service that allows private investors the opportunity to speculate on rising or falling markets, without having to pay stamp duty* or capital gains tax* on their earnings. With these firms you can place a spread bet on virtually any financial instrument such as shares, commodities, currencies, or even entire indices such as the FTSE 100. For example, if you think that the FTSE is set to fall in value, you might want to place a short (sell) bet on it, and if you are proved right, you will receive a profit. However if the FTSE were to rise, you would lose money.
Because you are merely speculating on the performance of financial instruments, rather than investing in them directly, you do not have to pay any broker fees, stamp duty*, or capital gains tax* to your spread betting firm or anyone else. This makes it ideal for the small investor. Also, the recent volatility in the stock market has made spread betting seem a lot more tempting for investors, as spread betting firms allow you to trade on falling or ‘bear’ markets - traditionally a bad time for investors.
The spread betting process is remarkably simple. All you have to do is set up an account with a spread betting firm such as Tradefair Spreads, deposit some money, and start placing bets. If you do not know much about the instruments you are betting on, you are far more likely to make poor judgements and lose money. So before you begin, you should be sure to read through the spread betting guide on the Tradefair Spreads website and read up on the latest movements in the financial markets. While a broad knowledge of the financial markets is desirable, it can be a good idea to concentrate on researching just one or two market sectors or instruments so that you can make better-informed judgements about their likely movements. You should also be aware that financial spread betting carries a high level of risk and you can lose more than your initial deposit, so you should ensure that spread betting meets your investment objectives.
*Tax law can change and may differ in other jurisdictions outside the UK.