One of the biggest reasons behind the growing popularity of spread betting and contracts for difference (CFD) is that these largely carry obvious advantages over other forms of investment. Remember that when evaluating the merit of specific investments and determining the profitability of each one, a lot of the decision making process lies in the advantages that are carried by that specific investment. In this post, we will look at some of the apparent advantages of spread betting and CFDs and how these are fueling the growth in the number of investors proportioning a fraction of their portfolio to these forms of investments.
- Right off the bat, the most obvious advantage of spread betting and contracts for difference particularly for investors in the UK market is that the profits are free from Capital Gains Tax(Spread Betting) and Stamp Duty (Tax laws are subject to change and depend on individual circumstances). Most other forms of investment in stocks, shares, futures, and commodities have profits that are taxed as earnings. The high rate of taxation can significantly eat into your portfolio so why not avail of legal means to save on tax without losing the profit?
- Spread betting and contracts for difference represents one of the few investment options in stocks, futures, commodities or indices where the investor has some semblance of control over the profitability of the venture. Consider; when you buy stocks outright from a company, the price movement is completely determined by what happens over the long-term and is dictated by company affairs beyond your influence. In spread betting, you should already have inkling on the tendency for a stock that you pick to go up or down. You do not go into a transaction blind and unexpectant of the things that can potentially happen leading to a loss. By studying the performance of companies and indices, you already have an idea of how it is going to perform in the next few days.
- Tenure is also another positive benefit for spread betting and contracts for difference. With its relatively short tenure, you are less prone to massive fluctuations due to dramatic changes in market conditions. Likewise, the short-term nature of the investment guarantees, up to a certain extent, that your forecast and analysis will hold over that time; hence, supporting the profitability of a stock increase or decrease within the period that you hold the CFD option or spread bet.
Think about these advantages the next time you consider options for investment. In particular, try to understand how you can take advantage of the benefits of spread betting and contracts for difference so you can use these to grow your own portfolio and increase the profitability of your ventures towards posting a positive gain in your investments.
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