The potential disadvantages of spread betting explained.
Spread betting holds a number of potential disadvantages over conventional share dealing or fixed odds betting.
Disadvantages over share dealing / financial trading
- If a bet is closed before the make up is declared you pay for the spread a second time.
- Many spread betting markets are very volatile. Unless you place a 'guaranteed stop loss', you can incur very large losses if events go against you.
- Losses cannot be offset against capital gains on other ordinary investments.
- It is less suited to long term investment as additional costs are often incurred each time the spread bet is extended to a new expiry date.
- You have no rights as an investor, including no voting rights.
- You will not benefit from dividends.
Disadvantages over fixed odds betting
- If a bet is closed before the make up is declared you pay for the spread a second time.
- Many spread betting markets are very volatile. Unless you place a 'guaranteed stop loss', you can incur very large losses if events go against you.
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