G
gonk
Guest
It is mostly true that long-term buy and hold investors in equities do alright, but it's not certain by any means. Suppose our hypothetical index fund investor had instead been unfortunate enough to go into the Nikkei 225 at its 1990 peak. 17 years later, his investment would still only be worth 47% of its original value - without taking inflation into account . . .
You can't assume that if you hold on long enough you'll make money and anyway if you want to do that as a spread bet, you can - just don't set any stops. You could, for example, buy the FTSE 100 at a Euro a point, incurring a deposit of about €6,650 at current levels. The max you can lose is the €6,650, but only if the FTSE falls to zero. Probably not a very good use of spread betting though and not one I'd recommend.
Going back to the example of the index fund versus spread bet, let's say you have €10,000 you want to invest tracking a major index like the FTSE. You might buy €10k worth of units in a tracker fund or an ETF. Alternatively, you might decide to open a spread bet with a guaranteed stop at 90% of the current index level, incurring a deposit of €1k. You could then put the other €9k on deposit earning 4% or so interest.
Leaving aside the cost of the spreads and the fund management charges, you have the same effective exposure to the index and will gain (or lose) the same amount. With the spread bet though, gains are tax-free, compared to 23% on the tracker fund and your losses are guaranteed to be no more than €1k, as opposed to no guarantee at all with the fund. This seems like a perfectly sensible use of spread betting to me. It's tax-efficient and lower risk than the tracker fund equivalent. On the other hand, I would certainly not suggest anyone gear themselves to the hilt as you can also do via spread betting.
Yes, but it's perfectly possible to take long-term positions using spread bets over periods of months or years. That's what I do. I'm long on the FTSE 100 and Nikkei 225 and intend to hold those positions open for the foreseeable future.
Once again, you can day trade in lots of ways including via spread bets. I would have absolutely no interest in intra-day trading or things like binary bets on whether the S&P 500 will finish up or down on the day. Doesn't mean all spread bets have to be like this. I'd refer you again to Mark Shipman, mentioned above. He's someone who it is generally agreed on this forum knows what he'd talking about and he makes all his investments as spread bets. Spread betting can be a useful - and low risk - tool in any investor's toolkit. It's all down to how you use it.