In the UK, Canada, and the USA, as well as across the developed world, there are many ways to make income through trading and investments. From FOREX, to traditional trading, spread betting, and other forms of investment, you’re options are pretty wide with respect to how you can make money.

There is some debate around which is better when it comes to spread bettering versus trading.

They both have their own advantages and disadvantages, and as with almost all financial decisions, it can be completely personal.

But we’re here to let you know how they differ, to better equip you to make a decision about whether you want to do one, the other, neither, or both.

Spread Betting: What It Is

Spread betting is actually quite simple. It is the betting on the rise and fall of the prices of a particular stock or commodity. Therefore, unlike trading, you do not own a portion of the actual stock or commodity – you are literally betting by saying “hey, I bet the price will go up – so I’m going to put money on it”.

That’s a really simplistic viewpoint on it but it at the very least explains what it is in basic terms. Investopedia will tell you more about it, if you really want to get into the nitty gritty.

Trading: What It Is

Chances are, you know what trading is. You buy a stock at a particular price. You sell it at another price. Pretty simple.

Spread betting and trading differ in the one huge way: you own part of the stock when you are trading, you do not when you are spread betting.

Which Is Better?

You now know what the difference between trading and spread betting is. Now you want to know which is better.

We won’t make the decision for you, but we can give you the pros and cons of each:

• Trading is taxable
• Spread betting is considered gambling in the UK, so any money made is not taxable
• Nothing is ever guaranteed when investing in stocks or spread betting. Or in life in general
• Commissions are generally charged on the stocks that you are trading
• Commissions generally are not charged on the stocks that you are trading
• You can spread bet with less capital than you can trade
• It’s a commonly accepted idea that it’s easier to lose more money with spread betting.

Again, we’re not going to make any decisions for you when it comes to whether spread betting, trading, or neither is better.

There are risks and benefits to both, and if you can’t handle the risks you should probably stay out of investing all together (or increase your risk tolerance).

Have you tried spread betting? If you have, do you prefer it to trading or vice versa?