Investing After The Credit Crunch
As the world slowly recovers from the credit crunch and we look back at what went
right and what went wrong, people are increasingly looking to take control of their finances.
Many of us are looking to be more tax efficient with our investments. We are also looking to adjust existing stocks and shares portfolios. And then there is considering new investment opportunities.
Even so, most of us could benefit from a little more research and financial planning. Having said that, there are a growing number of individuals who are making use of a newer, highly regulated, form of trading, namely
Spread Trading.
Before we proceed though, it should be pointed out that, as with all forms of investment, there is a downside and you can lose more than your initial stake.
Its worth questioning, as with all trading of the financial markets, why trade?
As we have just said, all forms of investment have risks attached. Of course, they all also have upsides and a spread trade is no different. In this case, apart from the potential profits, there are tax* advantages and quick, simple access to global markets.
There is a range of advantages with this form of trading. Firstly, an investor can buy or sell a market depending on how they feel the market will move.
Secondly, if a trade is going badly you can close it and limit your losses. Also, if a trade is going well you can close it and guarantee a profit.
Financial spread trading can often be faster than traditional trading methods, given that you are merely speculating on the future performance of a stock or asset, rather than taking ownership of a stock or asset.
You can, of course, make trades online and over the phone. There is the added benefit that a good number of markets can be traded outside normal market hours. The London Stock Exchange may close at 4.30 London time but with firms like Financial Spreads you can trade the FTSE 100 Index 24-hours a day during the week.
As mentioned, investing does have its risks. However, there are a few steps you can take in order to minimise your potential downside. For example, you could add a Stop Loss to your spread bets. If the underlying market moves against your position then the stop loss will close your bet and stop you from losing any more funds.
There are a number of regulated firms and they tend to offer thousands of international markets. Naturally, companies like
Financial Spread and IG Index offer the normal benefits of spread betting including; trading outside market hours, no brokers fees, no commissions and tax free trading*.
So whilst there are a good number of positives, it is important to understand the negatives.
Spread betting carries a high level of risk. You should only speculate with funds you can afford to lose. Before trading, please ensure that spread betting matches your investment requirements, familiarise yourself with the risks involved and, if necessary, seek independent advice.
What else should you bare in mind? Trade the markets you know. If you don't know anything about the Japanese Stock Market but understand the UK Stock Market then you are probably best off trading the FTSE 100 and leaving the Nikkei 225.
* Based on current UK Tax law, this may change or differ depending on your personal circumstances.
by: Robert Thomas
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