Difference Between Spread Betting And Share Trading
Difference Between Spread Betting And Share Tradingindependent2020-10-26T18:37:10+00:00
Financial spread betting is where wagering takes place not only on the outcome but the payoff as well; it also depends on how accurate the wager was in the case of several financial instruments. On the other hand, share trading is the trading of Company stocks and securities. These companies are listed on stock exchanges and where stocks are publicly traded. Spread betting is done through spread betting companies where money is made off the financial markets.
One of the main differences between financial spread betting and share trading is that the former has no taxes on profits gained from it. It means that the revenue earned from spread betting is tax free whereas the case is not so with share trading. Financial spread betting also gains over share trading when it comes to the aspect of short selling of share. Short selling is when someone sells stock that one doesn’t actually own at a higher price when it is expected that the price of the stock will fall, and buys them back at a lower price to make a profit. With Financial spread betting, this risk is eliminated since one only has to speculate about the stock rising in case of a long sell and the stock price going down in the case of a short sell.
However, there are areas where share trading scores over financial spread betting. While on the surface it appears that spread betting has no charges since there is no broker involved to be paid. However, the case is merely that the charges are disguised over the spread itself and sometimes, can exceed what one pays the broker. Also, the securities in which the spread betting can be done are limited. Spread betting companies take bets on stock markets indices more than on individual shares. And thus the scope of earning revenue can become limited.
Spread betting and share dealing are fundamentally different animals, although it is possible to spread bet on share prices. Share dealing is seldom as leveraged as spread betting, and is more suited to long-term investing. This is because the returns from unleveraged investments are comparatively smaller. Similarly, the barriers to entry with share dealing will usually be considerably higher than with spread betting, where traders can get involved from as little as 10p a point, and the flexibility of dealing in shares comes nowhere close to the variety of options (long, short, etc.) afforded by spread betting.
Spread betting on the other hand is highly leveraged, although also highly risky. Its favourable tax treatment over share dealing makes it potentially more cost effective, while the enhanced flexibility of being able to trade in both directions and on a wide variety of distinct markets makes spread betting a popular and potentially highly lucrative choice.