Spread betting or CFD trading?
The research group Investment Trends recently uncovered data that suggests traders who are primarily involved in spread betting were outperformed by traders who are primarily involved in CFD trading last year.
CFD trading was found to have created an average return of 20%, whereas financial spread betting led to just a 9%. CFD traders also reported fewer losses than their spread betting counterparts.
Joshua Raymond, Market Strategist with City Index, said: “One key difference is that all profits made in a CFD trade are subject to Capital Gains Tax, whilst profits made in a spread bet are currently free from CGT. However, you can offset any losses in a CFD trade that is used as a direct hedge, which is why some traders might prefer CFDs to hedge. However, tax laws are subject to change and you should seek independent advice.”
CFD trading is more widely used globally, although financial spread betting remains more tax efficient for the UK-based trader. The results also indicate the possibility that more experienced traders are using CFDs rather than spread betting, due to the ability to off-set losses against tax.
If you are a UK resident, which product do you prefer to use? Financial spread betting or CFD trading? Share your experience with other traders using the comment feature below.
