ETF’s have been heralded as one of the greatest financial innovations in recent years. ETF stands for exchange traded fund, which is an investment fund which is traded on stock exchanges like stocks. An ETF holds a variety of asset classes such as as stocks, commodities and bonds and in theory should trade near it’s Net Asset Value (NAV) over the course of the day. While a large percentage of ETF’s track indices in one way or another, their are now plenty of ETF’s which will give you exposure to a certain group of shares or a region.
The main benefit of Spread betting an ETF is that it gives you niche exposure to a certain market. While it is possible to get the same kind of niche exposure, for by making Spread bets on several stocks from the same sector. But Spread betting an ETF is much simpler than taking on several individual positions in order to gain exposure to one sector. The wide array of ETF’s available allow you to take positions on almost anything that you could conceive. A prime example of this is the Global X Fishing Industry ETF. Given that there is already a wide range of indices available to spread bet, spread betting ETF’s is only advantageous when you want exposure to particular market sector say US Oil companies.
Spread betting a ETF can sometimes be advantageous to owning a physical ETF. As Spread betting allows you to hugely ratchet up the amount of exposure that you have to that particular market sector or region. Though there are some leveraged and inverse (short) ETF’s available online they often offer a disjointed relationship due to the fact they are repriced daily. As these funds are designed specifically for day traders in mind. This is why Spread betting can give you both significant leverage and give you inverse position on an ETF without their being a disjointed relationship between the ETF and the underlying assets.
The advantages of spread betting an ETF can be undermined if you wish to take a long term position, as any advantage can be undone by the overnight costs of a spread bet which might wipe out the gains you were expecting. But for short term exposure to a specific sector, spread betting an ETF can avoid some of the costs linked to trading physical ETF’s. As well as offering the standard benefits of spread betting such as significant leverage and tax-free gains.
