Spread Betting Vs Share Dealing A Comparative Study

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Are you interested in trading in the financial markets? If so, there are two main methods to consider: spread betting and share dealing.

While both involve buying and selling assets in the hopes of making a profit, there are some key differences between the two.

In this comparative study, we will explore those differences so that you can make an informed decision about which method is right for you.

Spread betting involves placing a bet on whether an asset’s price will rise or fall. This method doesn’t require ownership of the underlying asset and instead relies on predicting price movements.

Share dealing, on the other hand, involves buying and selling actual shares in a company with the aim of profiting from any increase in their value over time.

Both methods have their advantages and disadvantages, so it’s important to understand them fully before deciding which one is best suited to your needs.

Understanding the Differences between Spread Betting and Share Dealing

You need to understand the differences between spread betting and share dealing because it can significantly impact your investment strategy and potential profits.

Spread betting is essentially a form of gambling on the financial markets, where you bet on whether a particular asset will rise or fall in value. The profit or loss you make is determined by how right or wrong your prediction was, multiplied by your stake per point.

Share dealing, on the other hand, involves buying and holding stocks in companies listed on stock exchanges with the aim of making a return from rising share prices or dividends. Unlike spread betting, when you buy shares through a broker, you become an actual shareholder in that company; meaning that if the company does well, you stand to benefit from its success.

Furthermore, there are tax implications for both forms of investment which can also impact your overall returns. Understanding these differences will enable you to make informed decisions based on your risk management strategies and investment goals.

Benefits of Spread Betting

If you’re looking for a more flexible and potentially tax-efficient way to trade on financial markets, spread betting could be the answer. Here are some benefits of spread betting that might pique your interest:

  • Tax implications: Spread betting is exempt from stamp duty and capital gains tax in the UK, making it a popular choice for traders who want to keep their profits as high as possible.

  • Risk management strategies: With spread betting, you can use stop-loss orders and limit orders to manage your risk and protect your investments. This gives you greater control over your trades and helps you avoid big losses.

  • Flexibility: Spread betting allows you to trade on a wide range of markets, including stocks, indices, currencies, commodities, and more. You can also choose from a variety of contract types and sizes to suit your trading style and budget.

Spread betting may not be suitable for everyone, but it offers several advantages over traditional share dealing. Whether you’re an experienced trader or just starting out, it’s worth considering if you want more flexibility and control over your trades.

Benefits of Share Dealing

Looking to invest in the long-term? Share dealing may be a better option for you, with benefits such as potential dividend income and ownership of actual shares.

When you buy shares, you become a part-owner of the company, which means that you have voting rights and can participate in important decisions. This ownership also allows you to receive dividends, which are payments made by companies to their shareholders from their profits.

Another benefit of share dealing is long term growth potential. As a shareholder, your investment has the ability to grow over time as the company becomes more profitable or expands its operations. Additionally, if you choose to reinvest your dividends back into buying more shares, this can compound your returns and result in even greater growth over time.

Overall, share dealing can be a great way to achieve long-term financial goals while also participating in the success of companies that align with your values and interests.

Which Trading Method is Right for You?

Determining the trading method that suits your financial goals and risk tolerance can be a challenge, but understanding the differences between share dealing and other investment options can help you make an informed decision.

When it comes to spread betting vs share dealing, both have their pros and cons. Share dealing may offer more stability as it involves buying actual stocks in a company, while spread betting allows for greater flexibility and potential profits through leveraging.

Your risk management strategies should also play a role in deciding which trading method is right for you. With share dealing, you have more control over your investments as you own actual shares in the company. This means that if the stock goes down, you still retain ownership of those shares which could potentially recover over time.

Spread betting, on the other hand, can involve higher risks due to leverage and margin requirements. It’s important to carefully consider your risk tolerance before choosing this type of trading method.

Ultimately, it’s up to you to weigh the pros and cons of each option based on your individual financial goals and preferences.

Frequently Asked Questions

How do I choose a reliable spread betting or share dealing platform?

When choosing a reliable platform for spread betting or share dealing, it’s important to consider the platform features and customer support options.

Look for platforms that offer user-friendly interfaces, advanced charting tools, and real-time market data to help you make informed decisions.

Additionally, check if the platform provides a range of customer support options such as live chat, phone support, or email.

Be sure to choose a provider with responsive customer service as it can help you navigate any issues or questions that arise while trading.

What are the potential risks involved in spread betting compared to share dealing?

When it comes to spread betting and share dealing, there are potential risks that you need to be aware of.

One of the biggest risks in spread betting is psychological factors. It can be tempting to take on more risk than you should or make impulsive trades based on emotions rather than logic.

In addition, poor money management strategies can also lead to losses in both spread betting and share dealing. That’s why it’s important to have a solid plan in place and stick to it, regardless of market conditions or fluctuations.

By being mindful of these potential risks and taking proactive steps to mitigate them, you can increase your chances of success in both forms of investing.

Is spread betting or share dealing more suitable for short-term trading?

When it comes to short-term trading, spread betting can offer you several benefits. With spread betting, you don’t need to own the underlying asset and can trade on margin, which means you only need a small amount of capital to open a position.

This makes it easier to make quick trades and take advantage of market movements. However, if your goal is long-term investment, share dealing might be a better option for you. Share dealing gives you ownership in the company and allows you to receive dividends and participate in shareholder meetings.

This can result in higher returns over time.

Can I trade international markets with both spread betting and share dealing?

Trading international markets is possible with both spread betting and share dealing. With spread betting, you can trade currency pairs from around the world 24 hours a day, five days a week.

However, share dealing may have limited trading hours depending on the country you’re interested in. When it comes to currency trading, spread betting allows you to easily go long or short on a range of currency pairs without having to worry about buying and selling physical currencies.

Overall, both options offer opportunities for trading international markets, but each has its own advantages and limitations to consider before making a decision.

How do taxes differ between spread betting and share dealing?

When it comes to taxes, there are significant differences between spread betting and share dealing.

With spread betting, any profits you make are tax-free since it is considered a form of gambling and not subject to capital gains tax.

However, with share dealing, you will have to pay capital gains tax on any profits you make from the sale of shares.

It’s important to note that both types of trading are regulated by the Financial Conduct Authority (FCA) and must comply with their regulations for transparency and customer protection.

Therefore, when deciding which method to use for your trading activities, be sure to consider the tax implications as well as regulatory compliance requirements.


So, which trading method is right for you? It ultimately depends on your personal preferences and financial goals.

If you’re looking for flexibility, low costs, and the potential for tax-free profits, spread betting may be the way to go. However, if you prefer a more traditional approach with ownership of physical shares and potentially higher long-term returns, share dealing could be the better choice.

It’s important to do your research and fully understand the risks and benefits of each method before making a decision. Talk to a financial advisor or do some independent research to determine which option aligns best with your individual needs and goals.

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