Making Money from Online Investments: Share Dealing, Spread Betting and CFDs
Leading economic commentators agree that the financial crisis we are entrenched in could reach an unprecedented scale, with only the smallest chance of a genuine recovery. But there are still great opportunities out there for financial-minded people to make good money using the wide range of online trading websites that are taking the stockbroking industry by storm.
Historically, recessions have always been a period when the least efficient parts of the economic system are pruned. It’s the old Darwinian concept of ‘only the strongest survive’. Well, this applies to investors as much as businesses. The old school way of doing things, going through traditional stock broker, often means you end up paying pretty high fees. It is common to see traditional fund managers and stockbrokers taking as much as a fifth of your trading profits as commision, on top of annual trading fees. That can turn a 10% return into just 6% – even less depending on your management fees. The issue becomes worse when you consider the constriction of profits caused by the recession. The truth is, many investors today finding it increasingly hard to maintain their profit margins using traditional channels of accessing the stock market.
This situation, however, is evolving. As the digital age matures, we’ve got access to instant real time information, high speed internet and sophisticated trading software. Essentially this means cutting out the middle man and recovering some of those lost profits for yourself. Online share trading services allow you to manage your own portfolio at minimal cost.
An added benefit is that when you switch to online trading you can take a long term view of your investments. It’s a far smarter approach than only looking at the short term quick wins
Alongside the rise in the use of online stock brokers, the volatile markets are also leading to a huge rise in financial spread betting. Rather than buying shares at one price and selling when they rise, spread betting doesn’t involve ownership at all; you simply bet on whether and how much the price will rise or fall. This is rightly known as the more risky side of trading, and losses can be big – but so can gains, if you do things right. A variant of financial spreadbetting is CFD trading, or Contracts for Difference. These are, quite simply, contracts between two people where each agrees to pay out on the difference between initial and final stock prices over a period of time. Spread betting and CFDs are both attractive alternatives to actually purchasing and selling shares amongst investors, particularly as you can profit from falling prices just as much as rising ones. They are both also really simple to get into online, which has also lead to the increasing usage of online CFD trading and spread betting of late.
The moral of the story? Exactly like businesses and corporations, individual investors need to be thinking about cutting their costs, improving efficiency and looking for new opportunities. For the individual investor looking to remain profitable while others collapse under the recession strain, it might be time to switch to trading online.
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