Hi all,
A bit of a novices question but, to my knowledge, spread betting on shares and contracts for difference are not a good substitute for long term buy and hold strategies for shares as
Pro of CFD - cgt deduction for interest if you borrow to buy (normally no CGT deduction for interest).
Con of spreads & CFD's - dont get the divs. (do some of them compensate you for this?)
I'm not anti spreads or CFD's (though the leveraging of some CFD's doesnt appeal to me, being fairly risk averse), so I'd welcome anyone to set me straight if, as I suspect, I'm not getting the full picture on CFD's & spreads.
A bit of a novices question but, to my knowledge, spread betting on shares and contracts for difference are not a good substitute for long term buy and hold strategies for shares as
- greater risk, you have to "pay out" to cover your loss. With equities the worst that can happen is you lose all your capital, but you've only lost it when you sell, & if you're holding for the long run then, on average, you'll recoup your money at least. Plus with equities you put your money in up front when you can defo afford it, on other options you get cash calls when maybe it doesnt suit you or your circumstances have changed for the worse.
- I'm presuming that either spread bets or CFD's have defined (& short) periods after which you have to settle up, so you "sell" when you wouldnt otherwise.
Pro of CFD - cgt deduction for interest if you borrow to buy (normally no CGT deduction for interest).
Con of spreads & CFD's - dont get the divs. (do some of them compensate you for this?)
I'm not anti spreads or CFD's (though the leveraging of some CFD's doesnt appeal to me, being fairly risk averse), so I'd welcome anyone to set me straight if, as I suspect, I'm not getting the full picture on CFD's & spreads.