Spread betting.
I thought I would write a few words about spread betting as a follow on to my article on Penny Shares, "Invest don't gamble". I would like to quote the work of Tom Murcko, CEO, InvestorGuide.com
"Gamble: To play at any game of chance for stakes. To stake or risk money, ... Read review
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A review by llbcollins on Forex, currency or index trading or financial spread betting, futures brokers November 4th, 2008
Author's product rating:
Competitiveness of charges
Average
Coverage of national/international markets
Average
Online - Content/organization of site
Average
Online - Reliability/speed of site
Average
Online - Ease of applying for products
Average
Online - Investment tracking
Average
Advantages:
a novel money making idea
Disadvantages:
depends on your moral view point
Recommend to potential buyers:
no
Full review
Spread betting.
I thought I would write a few words about spread betting as a follow on to my article on Penny Shares, "Invest don't gamble". I would like to quote the work of Tom Murcko, CEO, InvestorGuide.com
"Gamble: To play at any game of chance for stakes. To stake or risk money, or anything of value, on the outcome of something involving chance." http://www.investorguide.com/gambling-vs-investing.cgi
"Invest: To put money to use, by purchase or expenditure, in something offering profitable returns." http://www.investorguide.com/gambling-vs-investing.cgi
Tom Murcko the writer of the articles writes "... the distinction isn't clear. In investing, are you not betting on an uncertain outcome? Are you not taking a risk in the hope of gaining an advantage or benefit? In gambling, are you not committing money? Are you not doing it in order to gain a financial return?"
Another source I have studied says "spread betting with a proper system is not gambling. It's just another method of trading, whereby you can bet literally pennies." With spreadbetting you can also make money from shares going down as well as up, which you cannot do with ordinary shares. In this economic climate and with a bit of knowledge it is not hard for people to identify companies likely to lose value and make a bit of money from that.
The mechanisms of a spreadbet account can allow you to place your bet when shares rise or drop to a certain price, and that your bet is only activated if this happens, and based on whether that result happens your wager can be programmed for an expected share price to drop further or rise higher when that point is reached.
So for example Royal Bank of Scotland is trading at 70p, you can programme a bet, that should the price reach 75p, you believe the price will climb higher, or conversely you could programme a bet that should the shares drop to 65p you believe the price in your opinion will drop even lower. However if you lose the bet, you lose your money, and the greater the variation between your predicted outcome and the actual outcome the greater your loss, and you won't even have any shares left to show for it to sell on a future occaision if they rise. There are sophisticated mechanisms within spreadbetting accounts to allow bets to follow the market for more than a day or even months. So savvy traders can make an easy tax free income from this (as betting attracts no tax). Similar to the trade plan example I gave in my Halifax share dealing article, spreadbetters can limit their potential loss and profits, by terminating the bet if it starts going the wrong way.
Is spread betting bad? I wonder if it takes some of the volatility out of the normal market place, instead of people causing fluctuations in share prices by unpredictable buying and selling of real shares, or whether it encourages volatility, because people out there can literally make money from share prices going down?
However as Tom Murcko states "you can change the world in a small way by investing in companies you believe in, such as socially or environmentally conscious firms and mutual funds, or biotech companies that are working on diseases that might affect you or someone close to you."
I think it is bad that there is no encouragement from the government to do the right thing, as you can bet and make tax free profits from gambling but not from investing in the economy, and why gamble on penny share investments going up, when you can invest money in spreadbetting systems, betting on companies to collapse in the credit crunch and make money from it?
PLEASE SEE READERS COMMENTS - THIS IS HIGH RISK AND I AM NOT ADVOCATING SPREAD BETTING IN ANYWAY
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