Financial spread betting is a unique investment, and one that is heavily employed in the United Kingdom. Most investors are used to the typical price point of an investment. Meaning, they invest a certain amount of money initially, and when they cash out their investment, they expect that future price point to be much higher. Essentially that is your reward for the opportunity loss of capital tied up within an investment. However, spread betting derives its profits from the difference between the two price points, rather than the prices themselves.
It is important to understand though that spread betting can be both an attractive investment, and one that has its risks as well. Stamp duty and capital gains taxes can be quite hefty in the UK, and these investments are exempt from both. However, note that just as in the US (and many other countries) tax laws are known to change each year. Any sort of tax relief is enough to get me to start paying attention to an investment vehicle. However, it is not one without risks. Spread bets are leveraged investments, traded on margin that at any time could create a loss that is greater than your initial investment. Typical stock purchases limit your losses to your initial investment only, so you need to be extra careful if you aren’t familiar with spread betting. Spread betting platforms such as Finspreads have a how-to guide and tutorial to help you along. Other sites like City Index have a wonderful platform for trading these sorts of investments, and are currently offering a significant training credit.