How To Maximize Your Spread Bet And Investment Portfolio
Knowledge of financial markets is all well and good but some things are truly unpredictable and can have a huge affect on your portfolio, some times to the good but, unfortunately, more often for the worse.
No matter how good your research into market activity in all economic climates you'll never be able to predict developments like the Japanese earthquake and tsunami earlier this year, if seismologists can't predict an earthquake there's no reason why you should! But disasters can and do happen and ideally you should always have a contingency.
When an event of this kind occurs the volatility it causes in the market can spell disaster for normal investments but it can create profits if you're spread betting. Or it can see you losing even more than your initial deposit, the limits of this loss are defined only by the amount of leverage you were using.
So how can you prepare for the unpredictable?
The most obvious means of assessing market activity is market analysis. Use fundamental and technical data and you will be able to foresee trends and market movement, how stock responds to a particular set of circumstances and how frequently those economic situations are likely to occur. Fundamental analysis looks at the state of the economy and how a particular stock or fund behaves while technical analysis looks at price movement and volumes of assets traded.
Of course this doesn't help you foresee the unforeseeable but it gives you an idea of how things might pan out if and when events befall a market. To insulate yourself against unnecessary risk you would apply a stop loss. This is a mechanism which will pull your bet from a fund or stock when you reach a particular price point. By using a stop loss you limit your potential losses on any position to a predetermined amount. Play safe and you'll never loose a penny but you limit your scope for success at the same time.
You can't, however, rely purely on statistical data, insight, a knowledge of particular markets and the general mood of the market you're looking to invest in is also important. Knowing whether a particular set of circumstances would normally produce a bull or bear market is often only half the story. We all know the truism that you should buy when everyone's selling and vice-versa but who's got the nerve to do that every time? Knowledge of and faith in your investments will pay far more in the long term than just following the market.
Dan Cash is a financial feature writer and former researcher and analyst. He found that if you compare spread betting against other forms of investment it offers better returns and security than traditional investing . As the number of spread betting strategies and brokerages increases the deals they offer also improve.
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