If you want to expand your finance portfolio with tax free profits, investment in spread is a rewarding option for you to consider. But like every two sides of a coin, there are advantages and disadvantages. Before you start investment in financial spread, check its pros and cons so that you can utilize its leverages and stay away from its risks. Let’s check the advantages first:
You can transact without broker’s fee or commission
In most of the investments, you need to pay wide types of fees. Some of these fees are commission fees, clearing fees, exchange fees, spread fees, government fees, platform fees and charting fees. In case of spread bets, the fees remain spread in-built. So you need not to pay any fee extra.
It is a tax free investment
Spread bet investment is a tax free investment; hence you can invest here to increase the tax efficiency of your financial portfolio. This is a good way to offer redemption from your capital gain tax. By investing in spread bet you can reduce your income tax liability and stamp duty.
You can trade in variety of markets with varieties of products
Investment in spreads is a grand way to enter diversified company products and those companies may deal with overseas share markets too. As a result you will get to invest in varieties of markets and you can deal with varieties of shares. This is an easy and legitimate way to add diversity and advantages of dealing in multiple markets at a time.
You will get to trade with a small account and small stakes
One of the biggest advantages of investment in spread-bet is you can start with small account and small stake at hand. If you have limited money and you want to start spread trading in medium level, you can do that without good potential of earning in comparison to your fund size. However, before start trading you should check if the earning is Tax free in your country.
The facility of after hour trading
The trading hours of most of the spread markets are typically the same worlwide. You can trade almost 24 hours a day, 5.5 days in a week, with minimal time outages. In fact, some service providers even offer after-hours trading facility on key markets such as the FTSE, USA S&P 500, Dow, Germany 30, and some commodities such as gold.
Bet on whether the market will rise or fall
Most markets impose heavy limitations on the types of trades you can place, which means most of the traders can only look for profits in rising markets. With spread bets, you can locate profit potential if the markets are going up or falling down – a trait which obviously lends itself to trade in a bear market. This makes spread betting a lucrative option for day trading as you may catch the price rises and falls all through the day, which, in general, is only small swing.
Disadvantages of spread betting
There are some disadvantages of spread betting. These are,
- Acquiring spread bets for long tenure can be costly in terms of profit
- If you incur a loss out of your spread investment, you cannot offset this against your capital gains tax
- Financial spread betting companies reserve the right to change the spreads, margins, and markets available at short notice or maybe without notice
- It is common to get overwhelmed and start trading emotionally. You must learn to cut your losses and use reason behind trading: being emotional may cause financial loss
These are the advantages of disadvantages of Spread bet investment. While making your investment planning keep a track of these points to play as a winner.