Current market carnage - anyone selling or buying?

grey_gym_sock

the idea of using a long-term spread betting position as a more tax-efficient equivalent to a holding in the underlying share is of course only relevant to ppl who are already maxing out their ISAs and pensions. and from april, with the introduction of the £5,000 dividend allowance, even higher/additional rate taxpayers could have an unwrapped share portfolio worth perhaps £200,000, and probably pay no tax thanks to the the combination of the CGT and dividend allowances.

so while it may make sense in some circumstances, not for many ppl. and you also have to consider:

a) risk that the spread-betting platform can't honour its obligations. it's not very likely. and there are various protections in place. but it's an additional risk to consider, which doesn't apply when buying shares in the normal way. (and i say this as another shareholder in IG ... partly so i can point out that IG is the biggest and strongest spread betting platform, so you might minimize your platform risk by using IG instead of another platform .)

b) will having a spread betting account for long-term positions tempt you into trying out some more speculative punts, too? ... are you sure?

back on the original topic ... i have no idea what my overall portfolio has done since the end of december, when i looked. i know my SIPP is down a little (3%, maybe?) since then, because i logged in to reinvest the small bit of cash inside the SIPP. that's hardly a significant fall.

i'm happy if it amuses ppl to see how unphased i (and some other posters) are by market falls. hopefully it is also educational about the kind of mindset which it is useful to cultivate when investing. a lot of it is about being informed, i.e. knowing that market falls are to be expected.

EdGasket

Makkusu wrote: »

If you do the math, spread betting is the same as purchasing shares, but with the added benefit of being able to go short and not part with funds upfront.

It's a tool that every shrewd investor will use alongside the stock market, fact.

It's also a highly addictive form of gambling which will unfortunately make up the vast majority of its users.

You sound like you don't understand spreadbetting so I would stay away and your wallet will thank you.

You obviously haven't a clue. Spread-betting is entirely different from purchasing shares. For a start a spread-betting is future-priced at the expiry of the bet timeframe Not at the same price you could buy shares. Then you will have to pay further spread everyone you roll over your bet compared to no cost for holding purchased shares. There are other reasons like synthetic spikes which take out stop losses because the SB firm make their own market; that cannot happen in the real market with 100% visibility. Anyway you are evidently new to all this....

grey_gym_sock

Makkusu wrote: »

If you do the math, spread betting is the same as purchasing shares, but with the added benefit of being able to go short and not part with funds upfront.

why would you go short? the whole point of buying shares is that, overall, they tend to go up. why would you want to lose money, on average? to come out ahead by going short, you have to know more than most market participants, most of whom are professionals, and some of whom have (legal or illegal) inside info.

why would you want to avoid parting with funds up front, when
a) it costs you to do so - i.e. you pay interest, or an equivalent amount via other charges; and
b) if you don't have the cash to buy the share in the normal way, then you can be forced to exit the position due to margin calls.

It's a tool that every shrewd investor will use alongside the stock market, fact.

absolute nonsense. there are very limited circumstances in which it might - just might - make sense, and you haven't mentioned any of them.

tg99

EdGasket wrote: »

You obviously haven't a clue. Spread-betting is entirely different from purchasing shares. For a start a spread-betting is future-priced at the expiry of the bet timeframe Not at the same price you could buy shares. Then you will have to pay further spread everyone you roll over your bet compared to no cost for holding purchased shares. There are other reasons like synthetic spikes which take out stop losses because the SB firm make their own market; that cannot happen in the real market with 100% visibility. Anyway you are evidently new to all this....

Of course a forward shares bet is priced at a different price to the current price in the cash market as the spread betting firm is not going to fund your position for free. For shares bets, IG typically uses a funding cost of 0.5% + 3 month LIBOR so c1% pa. However, as you are not putting any (or only a little) money up front then you can then hold this money in a bank/savings account where you might well be able to earn a net of tax return greater than 1% pa. And if taking positions on index futures then the implied funding cost is a lot cheaper in most cases.

I do the math for any long-term position I take via a spread bet to work out how much it costs pa versus buying it in the cash market, i.e. factoring in rollover spreads, funding cost, tax savings, saving of stamp duty etc etc. I can then conclude if it is economically sensible for me to gain my investment exposure via the cash market or via a spread bet. As I have noted earlier, in some cases for higher rate/additional rate taxpayers, it is more cost effective to take out the position via a spread bet and have it on automatic roll forward (so you get a spread concession each rollover). I do not use stop losses for such positions, in part given the spikes as you have mentioned.

A_Flock_Of_Sheep

I have never used the stop losses feature either. But if people really want to find out and get better informed there are play environments with virtual money to try out and get better informed with.

My investments are only in cash and CFD's and spread betting and you are right about the interest earning in an account.

tg99

grey_gym_sock wrote: »

why would you go short? the whole point of buying shares is that, overall, they tend to go up. why would you want to lose money, on average? to come out ahead by going short, you have to know more than most market participants, most of whom are professionals, and some of whom have (legal or illegal) inside info.

why would you want to avoid parting with funds up front, when
a) it costs you to do so - i.e. you pay interest, or an equivalent amount via other charges; and
b) if you don't have the cash to buy the share in the normal way, then you can be forced to exit the position due to margin calls.



absolute nonsense. there are very limited circumstances in which it might - just might - make sense, and you haven't mentioned any of them.

An example of why you might want to go short is to hedge your risk. For example, you might have company shares / SAYE plan etc where it has rallied in price hard and you want to lock in the gain but cannot sell the shares yet (e.g. because they are in a holding period).

Another risk you might want to hedge is out of the market risk for example when transferring a company pension pot to a SIPP provider where the investments have to be sold before the money is transferred across and then reinvested by the new SIPP provider. I would rather use derivatives/spread bet to maintain my desired asset allocation during such a transfer rather than being out of the market in cash for several weeks or longer.

See post above for why you might not want to part with funds upfront - it may be cheaper not to and put the equivalent amount in a bank/savings account generating a higher net of tax return than the funding cost.

A_Flock_Of_Sheep

The Guardian has a report on the markets...

http://www.theguardian.com/business/2016/jan/12/beware-great-2016-financial-crisis-warns-city-pessimist

grey_gym_sock

tg99 wrote: »

An example of why you might want to go short is to hedge your risk.

agreed: that's a sensible reason.

what i was arguing with was Makkusu's comment that "spread betting is the same as purchasing shares, but with the added benefit of being able to go short" - which gives the impression that selling a share short (without it being a hedge) is about as sensible as going long a share.

See post above for why you might not want to part with funds upfront - it may be cheaper not to and put the equivalent amount in a bank/savings account generating a higher net of tax return than the funding cost.

so for a fractional gain in interest, you'll risk getting your position closed out in a price spike? that sounds like poor risk management.

tg99

grey_gym_sock wrote: »

agreed: that's a sensible reason.

what i was arguing with was Makkusu's comment that "spread betting is the same as purchasing shares, but with the added benefit of being able to go short" - which gives the impression that selling a share short (without it being a hedge) is about as sensible as going long a share.



so for a fractional gain in interest, you'll risk getting your position closed out in a price spike? that sounds like poor risk management.

Incorrect. It's only poor risk management if you allow yourself to be at risk of being closed out which I do not.

racing_blue

right ... where do I sign to buy a basket of shares in spread-betting firms?

I must say this has been a most enjoyable thread so far... thankyou. Can barely weight for the next 50%+ market crash & associated banter.