Fancy yourself as a trader? We’ve all dreamt of making it big in the city. Trading stocks and shares by the billion before sailing off into the sunset on a big yacht is a cliché, but at least it’s a good one. The good news is that at least one part of that scenario is easier, more accessible and less expensive than you might think – at least for UK-based wannabe millionaires.
Have you heard of financial spread betting (FSB)? FSB is a derivative based vehicle that allows you to enjoy the thrills of playing the market without having to actually go through the tortuous and expensive business of dealing with brokers, the tax-man or any of that complex bureaucracy. FSB is investing made interesting. Here’s how it works.
FSB explained
The clue is in the name. Rather than actually purchasing stock (or currency or gilts, bonds etc.) what you do is commit to a position on your chosen stock and if the market moves in your direction you cash in. What’s more it’s not like your standard sports bet where you stake is fixed. In FSB your initial stake is simply a marker and the win is proportional to the amount of movement in the market. So if you commit to a £5 stake, you will return £5 for each point that the market moves in you favour. A four point move would equate to a £20 return.
The downside is that losses are calculated the same way. If the market moves against you your losses are calculated on the same multiple basis: taking your eye off the ball can be painful.
Tax free and easy
The great thing about FSB from the point of view of those of us with only a limited amount of cash to invest is that it is incredibly easy to access. There are no intermediaries to deal with – the software provided allows you to simply click to trade. It is the nearest thing to being an actual trader you will ever experience.
What is more, in most cases because you are not actually buying any stock, but merely betting on its movements, there is ordinarily no tax to pay on any winnings. With initial deposits as low as £50 the bars to entry are incredibly low.
A free education
If this all sounds like it could be a bit of a leap in the dark – there are lots of things you could use that £50 for after all – the good news is that the main providers all offer demo apps that allow you to play without putting so much as a penny at risk. For example, the Tradefair site enables you to set up a dummy account and to start getting the hands-on experience – and the buzz – of trading within just a couple of minutes. Watching the actual market numbers move in real time is a nerve jangling experience -even when you’re only playing for fun! What it amounts to is a free education into exactly what you need to do to when you put some money down for real.
Incentives
Once you’ve been through the demonstrations and you’ve developed a reliable trading strategy the good news is that there are some juicy inducements to get you to start trading for real. For example, at the time of writing Tradefair are offering a 10% bonus on all initial account deposits up to a maximum of £1000. Clearly, there are some people dealing in large multiples. The good news is that there is a way for those of us who are starting out with a more modest means to access the same markets, on precisely the same terms.
For anyone interested in playing the markets, FSB is a great place to start – and it’s addictive fun! It’ll certainly keep you happily ticking over ‘til your yacht comes along!
James Hendrickson is an internet entrepreneur, blogging junky, hunter and personal finance geek. When he’s not lurking in coffee shops in Portland, Oregon, you’ll find him in the Pacific Northwest’s great outdoors. James has a masters degree in Sociology from the University of Maryland at College Park and a Bachelors degree on Sociology from Earlham College. He loves individual stocks, bonds and precious metals.
