Spread betting – is it for you?
Many novice investors think that spread betting is the safest place to start in high risk/return financial investment. However, there are still many more losers than there are winners simply for that reason; many newcomers try spread betting, lose their initial small stake and decide that UK financial market gambling is not for them.
The first thing to do is to have reasonable expectations. If Warren Buffet, with the years of experience and billions of dollars he has available, only averages a thirty per cent return, then it’s unlikely that your thousand pound pot is going to do much better.
Most experienced players will tell you that, during your first year, your ambition should be to minimise your losses rather than focus on possible gains by making impulsive decisions. Think of the first year as your internship or study year; ultimately your success in spread betting will be determined by how well you can read both the market and the wider environment and make quick determinations of how the one will affect the other. During your first year you will rapidly lay the foundations of the knowledge and experience you will need.
Like any form of positive investment management, financial spread betting requires homework, the more the better, to help you understand the characteristics of markets and assets. What global factors would have a significant effect on, say, a commodity market like coffee; or what might create a dramatic rise or fall in stocks such as engineering or banking?
Clearly a novice player needs to gain a basic knowledge of how specific markets and industries work, but they also need to know how the wider economic and political developments, both in the UK and globally, will influence how optimistic or pessimistic you should be in your analysis of a particular asset. The internet has made it easy to do this research and there are many forums, advice lines and management sites that you can subscribe to that will deliver market synopsis and access to instant global news to enable you to keep your ear to the ground and your eye on the ball, together with any other old expression that will allow you to maximise your opportunities in a very dynamic playing field.
If you are prepared to put in the homework then UK spread betting can be both a rewarding investment and a highly absorbing hobby that can be increasingly addictive, especially with one of the more reputable companies such as http://www.ig.com/uk/spread-betting.