Best share spread betting account?

Pachira

I would also recommend Capital Spreads - really easy to use platform, helpful customer service, tight spreads, no slippage.

jamesmorgan

Another vote for IG Index. I find their platforms easy to use, their spreads low and re-assured that they cover any exposed positions by direct investment in the market. Their size is also a plus as they are less likely to go bust.

The only reason I use spreadbetting is that it is cheaper for me than direct investment (as no stamp duty and no dealing charges). However, whether this is true for you depends on your trading strategy and size of your deals. For example, if you plan to hold individual shares for 6 months+ then it is likely to be cheaper using direct investment (as SB interest rate charges will be higher than stamp duty/dealing charges).

I also have a golden rule that I never invest more than I hold in other safe assets (ie I don't really trade on margin). For example, if I have £100K available to invest I put the £100K in a cash interest account. The maximum I can then invest on a share worth £1/share is £1000/point. If the share goes bust I lose my £100K but no more. It is of course possible to trade on margin (ie using capital you don't have), but this is very risky and only suited to v. experienced investors who fully understand risk (and don't mind going bankrupt!).

Before you decide on platform, you need to work out your trading strategy. Once you have done that, you need to work out the cheapest method of trading that strategy. SB may be the answer, but it could easily not be.

khampson

I plan to keep investing small amounts for short periods. Less than 3 months. Because I plan to trade small amounts it seems share dealing is too expensive with the fees for buying and selling. I would need tge market to go up and need to wait a long time for it to get my value back. I plan to feed small amounts on a monthly basis

Where can I decide or get more information to get a plan of action that will work on sb? Its easy to go in blind and that will be an expensive lesson!

Keith

jamesmorgan

khampson wrote: »

I plan to keep investing small amounts for short periods. Less than 3 months. Because I plan to trade small amounts it seems share dealing is too expensive with the fees for buying and selling. I would need tge market to go up and need to wait a long time for it to get my value back. I plan to feed small amounts on a monthly basis

Where can I decide or get more information to get a plan of action that will work on sb? Its easy to go in blind and that will be an expensive lesson!

Keith

Most of the SB platforms have quite comprehensive guides on both the process of spreadbetting and the charges. However, spreadbetting is best used for short duration trades. Such trades are based on sentiment rather than fundamentals. As such you really need to understand trading using technical analysis. This is quite a complex area and until you really understand this I would stay clear of spreadbetting and simply invest directly in a tracker or portfolio of high quality shares.

However, if you do decide SB (and TA) is an option for you, it is quite easy to produce a financial model to see whether spreadbetting is cheaper than direct investment for a particular strategy. For example, if your average trade is £10K and charges for direct investment are £10/buy and £10/sell, then rough charges are as follows:

Direct Investment

Stamp duty - 0.5%
Spread - 0.2% (typical for FTSE100 share)
Charges - 0.2% (ie £20 for £10K)

Spreadbetting

Spread - 0.4% (additional 0.1%*2 premium from SB company)
Interest - 0.25%/month - based on current LIBOR rates

So for a 3 month hold, direct investment cost would be 0.9% vs 1.15% from spreadbetting (ie better to invest directly). However, as charges for direct investment are fixed, the equation changes for smaller trades (eg for £5K, it is 1.1% direct investment vs 1.15% spreadbetting). Also note that it is possible to partially offset the SB interest charges if you hold the true capital in an interest account. In fact if you found an account paying 3% interest (after tax) then you could fully offset the interest charges (LIBOR 0.5% + 2.5%) so spreadbetting is currently always cheaper than direct investment. This will change as LIBOR rates rise.

merlingrey

It's called "betting" for a reason, i personally prefer poker and playing on poker sites for small money level betting and fun i'd say try poker instead.

EdGasket

I think statistically something like 90% of spread-bet accounts make a loss. If that doesn't set alarm bells ringing then ask yourself why there are so many spread-betting advertisements all over financial websites, many of which offer you a 'bonus' to join up? I'll give you a clue; it's not so that they can hand over money to you for nothing! AVOID!

sabretoothtigger

I use many of these all the time. My main advice would be to stick to small bits of shares or better still unit trusts.

However if you are determined to go ahead then Im happy to discuss the various companies, send me a message and I can decide which is the best setup for you. They all vary slightly,
IG is the largest maybe most professional but Im not sure the best for a beginner

Unless you have 10k cash on your desk sitting spare right now, tread very carefully and measure twice before attempting to cut any new trade.
I think it takes a couple hundred to risk 7000 or so in some extremes

90% of spread-bet accounts make a loss.

If its used as a hedge, a loss would be welcomed. Alot of it is in context, I really recommend starting very slow very small, really its for people who already traded shares for years

Spreadbetting

Spread - 0.3% (additional 0.1% premium from SB company)

Anticipate more then 0.1% I'd say figure in 1% extra cost to spread, maybe not for the main FTSE stocks but generally..

psychic_teabag

khampson wrote: »

I plan to keep investing small amounts for short periods. Less than 3 months. Because I plan to trade small amounts it seems share dealing is too expensive with the fees for buying and selling.

There are tables here comparing costs for spreadbetting and normal trading for various time periods: http://www.fool.co.uk/news/investing/2011/01/26/share-dealing-vs-spread-betting.aspx

The author of that article has his own blog here : http://betterspreadbetting.blogspot.co.uk/

jamesmorgan

EdGasket wrote: »

I think statistically something like 90% of spread-bet accounts make a loss. If that doesn't set alarm bells ringing then ask yourself why there are so many spread-betting advertisements all over financial websites, many of which offer you a 'bonus' to join up? I'll give you a clue; it's not so that they can hand over money to you for nothing! AVOID!

Spreadbetting companies are like all other brokers in that they make money when investors trade. Their returns come from the interest on margin and the increased spread. It makes no difference to them whether individual investors make a profit. They balance investor's long positions with short positions - and if there is any difference simply hedge this risk by direct investment in the market. The simplest analogy is with a mortgage company - they make money from the interest they charge you for the loan - it doesn't really matter to them if your house goes up or down in value.

It is true that many spreadbet accounts make a loss. One of the reasons for this is that spreadbetting attracts more than its fair share of inexperienced investors. Another reason is that it attracts many day traders - it is notoriously difficult to make money day trading as the spreads too easily wipe out any gains. Ultimately there is no reason why using a spreadbetting account should show any differences in returns from any other method of investing. In the current climate of low LIBOR rates, returns should be higher than direct investment as overall charges are lower.

jamesmorgan

sabretoothtigger wrote: »

Anticipate more then 0.1% I'd say figure in 1% extra cost to spread, maybe not for the main FTSE stocks but generally..

IG Index charge 0.1% premium on FTSE100 stocks. This is on each side of the underlying market spread so the overall impact is a premium of 0.2%

I would be very cautious about investing in non FTSE100 stocks as not only is the premium higher (0.25%*2) but also the underlying spread is higher. For FTSE250 stocks the typical overall spread is up to 1.0%. The key to successful investing is to minimise costs. If you invest in illiquid stocks (eg AIM) you are going to get your fingers burnt.