Successful investor in the past. Since 1999 have believed that property was the only low to medium risk that had any hope of success in the UK. My wife has disproved this! She has Out performed me, to what extent I am not sure! But my advice to her in 2000 was to sell her entire Share portfolio (FTSE100 at 6800 it fell to 3850) so she started off with a loss! With the capital raises I advised buying 4 semi ready to let houses within 10 miles of our home. As she enjoyed watching the markets I suggested a £10,000 share portfolio for fun. The rental incomes at the time gave a yield of between 12 and 15%. I advised selling in June 2007 at what I thought was near enough the peak of the market to allow sales to complete before the crunch which I had predicted 18 months before. The cash raised would hasve been 1.2 to 1.5 million sterling from a pore crash start of £380,000. You may think I have done well but she has done better! My problem now is she has become addicted to spread betting. Won't talk about it. We could lose everythIng I do not think she understands the risks. Anyone been there? Anyone had experience of Barclays Stockbrokers giving unregulated advice and churning investment products?
Jaydee
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Hi Des
The main thing to be aware of regarding the risks of spreadbetting is that it is a leveraged product. By this I mean, you will only have to put up, normally, between 1% and 10% of the full value of the product you are trading. Essentially, what you put up is not the most you could lose. E.g. if you put up £10,000 with margin at 10%, then you are actually trading with £100,000 and could, thefore, lose a good deal more than £10,000 if you go offside long enough.
The best thing to do here is work out what your account equity is and perform a few calculations to make sure you don't risk more than 1% of this money on a single trade. Essentially, your calculations should allow you to size correctly into the market relative to your account equity and stop loss (which should be worked out relative to the volatility of what you are trading).
I know I've talked about it relative to yourself when it is actually your wife doing this, but it's important that you understand the risks if she won't listen. You mentioned that she is addicted which is worrying - the very suggestion means that she is probably gambling and not trading. A trader with a negative emotional response to the market is a very dangerous one (think Nick Leeson and, recently, Jerome Kerviel). So, yes, you could lose everything and, because of the leverage, end up in debt.
Have you noticed, while your wife is trading, any phone calls from the spreadbet firm relating to "margin calls"? If so, you need to talk to your wife about this regardless as it means she is losing more than her initial deposit.
Try to understand that the emotions that go with losing money are a strong feeling of failure and regret. Therefore, suggest that she doesn't give up, just try with less money (you can spreadbet for 50p an index point with some firms) until she become profitable trading. Then increase size in steps. Sounds to me like you're going to have to take on the Risk Manager role.
Best
JD
The main thing to be aware of regarding the risks of spreadbetting is that it is a leveraged product. By this I mean, you will only have to put up, normally, between 1% and 10% of the full value of the product you are trading. Essentially, what you put up is not the most you could lose. E.g. if you put up £10,000 with margin at 10%, then you are actually trading with £100,000 and could, thefore, lose a good deal more than £10,000 if you go offside long enough.
The best thing to do here is work out what your account equity is and perform a few calculations to make sure you don't risk more than 1% of this money on a single trade. Essentially, your calculations should allow you to size correctly into the market relative to your account equity and stop loss (which should be worked out relative to the volatility of what you are trading).
I know I've talked about it relative to yourself when it is actually your wife doing this, but it's important that you understand the risks if she won't listen. You mentioned that she is addicted which is worrying - the very suggestion means that she is probably gambling and not trading. A trader with a negative emotional response to the market is a very dangerous one (think Nick Leeson and, recently, Jerome Kerviel). So, yes, you could lose everything and, because of the leverage, end up in debt.
Have you noticed, while your wife is trading, any phone calls from the spreadbet firm relating to "margin calls"? If so, you need to talk to your wife about this regardless as it means she is losing more than her initial deposit.
Try to understand that the emotions that go with losing money are a strong feeling of failure and regret. Therefore, suggest that she doesn't give up, just try with less money (you can spreadbet for 50p an index point with some firms) until she become profitable trading. Then increase size in steps. Sounds to me like you're going to have to take on the Risk Manager role.
Best
JD
