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COMMENT
Spread betting has really taken off in the last few years. Put simply, it enables investors to bet that a share price will go down as well as up. Many private investors are put off by the higher risk while others think it seems too complicated. On the risk front, it's true that most spread betters do actually end up losing money. If you're not used to the process of buying and selling shares and how the stock market works, then spread betting should certainly be avoided. If you reckon it's too complex though, I'd urge you to think again. The basic concepts aren't that difficult. I believe that all experienced investors should at least consider whether spread betting might be right for them. A good place to start that process is the Fool's spread betting centre. Then if you're still interested, have a look at "The Beginner's Guide to Financial Spread Betting" by Michelle Baltazar. Baltazar, a former journalist at Shares magazine, assumes you have no knowledge of spread betting and she takes through you all of its advantages. For me, the biggest plus is that you don't have to pay capital gains tax on any profits you make. Secondly, I like the ability to 'short' a share - in other words to bet that a share price will go down. I only started spread betting this year. I often kick myself for not waking up to the spread betting revolution in 2001. Back then, many technology shares were crashing and there were some fantastic shorting opportunities. So if you think a bear market is round the corner, now could be a good time to open a spread betting account. Baltazar also outlines the disadvantages. Spread betting's biggest drawback is that you can lose more than your initial deposit or capital. That's because spread betting effectively gives you the opportunity to make a £1,000 bet whilst only depositing £100 in your account. That margin requirement can vary from share to share and company to company, but 10% is the most widely used figure. I fear the last two sentences may confuse some readers. I don't have the space to explain in more depth. But trust me, Baltazar makes it all crystal clear! Anyway, the important point is that a reckless spread better could lose a lot of money very quickly. If you're an experienced spread better, you may not find much that is new in this book. If you're just about to start, it's well worth buying. Everything is explained clearly and simply, and it won't take longer than an afternoon to read. You can buy The Beginner's Guide to Financial Spread Betting from the Fool bookshop.