Investors all over the world fall into different logical categories. There are some who run their own business and need a wealth manager to put their extra money to good use. There are also families who have collected wealth over a period of time. Sometimes their wealth has been passed on from generation to generation and finally, someone in the clan decides to hire a wealth manager to diversify their wealth into different asset classes. Most of the time, what these wealthy individuals are trying to do is keep themselves safe during tough economic tough economic. Wealth managers may sometimes work with trusts which are set up to preserve and grow the wealth of their shareholders.
In simple terms trading on margin (whether in a spread betting account or any other), is trading using borrowed money, nothing more, nothing less. Let me give a simple example (I like simplicity!). Suppose you are playing poker and have what you think is a good hand. You have already put £100 on the table, but you have no more funds available. The first option is to fold and walk away from the table having lost £100, in other words 100% of your money. Option two is to borrow some money from a friend and carry on with the hand. Let’s assume this happens and you borrow an additional £100 but still lose the hand – in this case you have lost your own £100, the borrowed £100, but you now owe your friend a further £100 ! Let’s look at the maths of this simple example as follows: