Sounds like a 'no brainer'? Actually no, investing in shares has always had it's place and always will as a way to improve your wealth. It doesn't always improve your wealth but, history shows the stock markets have returned more over the past 5 years than say stashing your money in an ISA paying 0.5%.
Lets start by making the distinction between investing in shares and trading shares. They are two very different mechanisms of attempting to profit from the financal markets. So should you do one instead of the other or can both methods be used in order to maximise your profits from the markets?
For those of you that have a share portfolio, the general goal of owning one is to gradually build wealth over the longer term. This is done through the buying and holding of a portfolio of shares, baskets of shares, funds and other investments.
In my experience, the most successful investors I've met have been happy to weather the storm in light of adverse news that have caused their shares to drop. Over the years and looking back at history, the markets have in many cases risen again. This is why good quality shares chosen from the outset, where that quality has continually been monitored, has helped investors reach their goals.
On the other hand, you have spread betting or spread trading as it is also known. An interesting hybrid involving taking a position on the markets but, because it's labelled as 'betting', tax laws differ meaning advantages are to be had in paying no Capital Gains Tax! It is still a sector heavily regulated by the F.C.A and we would always be obliged to tell you here at E & P, that your losses can exceed your initial outlay.
How can you lose more than you started out with you may ask? If you do not, take risk measures such as setting a guaranteed stop loss and the market hits a level where you do not have enough money to keep your position open, that position may slip to a level where your account goes to zero and then some. So now this worst case scenario has been explored and we recommend you always bear this in mnd, then what are the benefits?
If most importantly, you learn about trading first by reading this Enders & Power resource and those provided by the regulated individual providers themselves, then trading shares via this spread betting method can generate some decent profits. Your time can be employed well if you have a view that a specif share in your portfolio is going up over the short-long term for example. You can place a trade to reflect this and use the power of leverage to magnify your profits. Also, traders can hedge their portfolios by taking advantage of the fact you can bet on the shares to go down.
In conclusion, we'd say trading is not for everyone but, those that can afford to lose and have the solvency to get involved with a way of generating profits methodically, can benefit from this age old technique. The great thing is you don't have to try it with real money to begin with, A demo account can be opened first or in conjuction with a live account. Take a peek at the platform providers section for a company that offers one of these.
