R2 FINANCE

These days a lot is being said about Financial Spread Betting. Most of the people think that financial spread betting is very similar to stock trading. Well, the only point of similarity between the two is that both relate to shares and their prices. Apart from this, these two terms are completely different from one another. Let us understand each of these terms in terms of taxing laws, scope of investment and rules and regulations then differentiate between the two.

Difference in terms of scope of profit

In case of stock trading, you invest your money by buying stocks of the company you prefer and earn a profit when the prices of the stock rise and you sell your stocks in the market. There is no limit on the number of shares of a company you buy and your profit is only limited by the number of shares of a company you have decided to purchase. While in financial spread betting, the companies or agents usually take bets only on the overall stock indices. So if the index goes in accordance with your predictions you earn money, otherwise you lose your money. So the scope for profit is quite limited in spread betting.

Difference in terms of tax liabilities

In case of financial spread betting there is no tax on the profit earned. This is due to the fact that there is no actual exchange of shares in this type of investment. Financial spread betting is just a contract and is considered to be a form of gambling, so it only comes under the purview of the tax that has to be paid on gambling deals.

Rules and Regulations

In stock trading, there are regulatory bodies which determine the rules and the regulations and ensure that nobody violates these rules. This means that the rules are fixed for each and every individual and there is a higher body ensuring that there are no scams or frauds. On the other hand the companies which indulge in financial spread betting are not quite different from casinos. They make their own rules. Also, one thing that needs to be understood is that there is always a house advantage so whatever be the case, these companies are bound to make profit whether you like it or not.

Thus we can say that financial spread betting is quite different from stock trading and one has to be careful while indulging in financial spread betting. This is due to the fact that if one is not careful he may end up losing a lot of money.