What is good about shares and what is good about spreadbetting?
With spreadbetting there is no capital gains tax and no stamp duty. You only pay the ‘spread’ so there are no dealing costs.
You can go ‘short’ with spreadbetting which means you are betting that the price will go down. You can’t do that with shares.
However you can also win big and lose big. You have to put a limit and stop on when you put on a trade. You have to know what you’re doing when you’re spreadbetting. You probably should look at it everyday. If you're doing badly you certainly have to look at it- to adjust your stop losses perhaps. The spread amount can change. Aim to get as low a spread as possible. Bigger market caps are better for this. Ideally you want the spread to be around 0.25%. If a spread is over 1% it may not be worth doing.
If you hold a spread it should be going up or down a fair amount. If it stays flat or even only slightly up or down you shouldn’t hold it. You can with a share though.
Have a clear target price or stop loss. Consider using a ‘trailing stop loss’- a sell if it drops a certain amount below the current spread level.
You also have to pay a ‘stock borrowing’ small charge with a short. Ideally you should have a catalyst as well as a high valuation with a short. High valuations can get even higher on misplaced sentiment.
Smaller amounts means I can take a position on any share I want. You can get exposure to practically anything with spreabetting.
At the same time though you have to be careful not to watch spreads too much. Watching too much means you might do something just for the sake of doing it. Really you should just pounce on great opportunities.
With shares you don’t have to set a stop loss or limit price. Overall when you’re buying a share it’s a more long term investment. Probably you will intend holding for at least a year. Often longer- I have held some shares for over twelve years. There’s less potential risk and less potential reward with shares.
Overall if you’re starting in shares what you should you do?
It’s less risky to start with shares if you’ve got a decent amount of money. It’s also practice for doing spreadbetting later if you want. Remember if you’re buying a share though you should put at least £1,000 in- that’s if you can get dealing costs for £5. With stamp duty that will bring your costs to 1%.
There is something to be said for the ‘learning experience’ of doing spreadbetting though, although I would recommend starting with small bets first. A share like Lloyds at the right price is a decent example. Even if you only break even in the long run it would be worth it for the learning experience.
For me personally I will continue to do a mixture of spreadbetting and shares. I still have plenty to learn about shorting UK shares and more to learn about the ‘technicals’ with spreads overall. I think as long as I have enough money I’ll be doing both for the rest of my life.
I have an idea for a spreadbetting and shares article which might be high value enough to only be written privately. Been thinking about it a lot today after closing out of @JustEatUK with a tasty profit...
4s4 seconds ago
The next stage for me is BETTING BIGGER with spreadbets... same time and effort, more money... I have plenty of cash now so time to invest or spread more by trusting my instincts in a BIG way when the time is right...
1m1 minute ago
I read @Financial_Orbit content every day... I still made money out of @Tesco going down when he was long... I read @wheeliedealer content every day I still made money being short on @boohoo when he was long...
9s10 seconds ago
Happy to hear from any of my new writing followers about share writing opportunities!
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37s38 seconds ago
Over 550 followers on twitter now thanks to @Ocado ... Just so you all know I'm a share investor really- only just started shorting shares. Long term buy and hold mainly. I have over 150,000 views on my share articles worldwide and website at http://www.markhowitt.blogspot.com
Good to get some quality new connections recently... most new twitter followers I've had in a day. Especially interested in connecting with people with experience in property in Huddersfield and West Yorkshire. Property research continues...