Spread betting research shows clients prefer FTSE indices and high risk AIM stocks

The beginning of any new year is typically an opportunity to make a fresh start with various things in one’s life – be it investment or otherwise. It is an opportunity to refresh your investment portfolio but also a time to look back at the past year and understand what has been done in attempting to learn issues that we can hopefully use to improve our trading.

One spread betting firm has just published a small report detailing what its clients had been doing during 2012 which, as spread betters, is interesting to look at in trying to understand what spread betters have been doing right and, perhaps more importantly, what they have been doing wrong.

Not unsurprisingly given that the analysis was done by a UK spread betting firm, this particular firm’s clients prefer to place their bets on UK stocks. The firm’s clients invested the most in FTSE 100 stocks, followed by Non-350 & AIM, FTSE 250, and finally reserving 16.5% of their total equity bets for Non-UK stocks.

FTSE 100 as an index had a mild year from a performance perspective, returning just 5.8% for the year, although this masked some summer volatility on Euro woes and was a good opportunity to profit from the volatility. It seems from the research that the lower spreads is the primary attraction of this market as well as of course familiarity with it being the firm’s typical punters home domicilium.  

Clients trading in FTSE 250 stocks actually make up just a small part. That, to us, is a real missed opportunity as FTSE 250 stocks still benefit from tight spreads and the index returned a stellar 22.5% in 2012, outpacing any other UK index.

Non-350 & AIM stocks continue to be the top preference of clients, capturing one quarter of all equity trades as punters chase high beta and again, not unsurprisingly given the chosen trading vehicle, risk. Clients looking for alpha returns in these small caps however not the best of years as the FTSE AIM All-Share returned just 2% and was the worst performer of main UK indexes. Within that were some real humdingers amongst the mining and oil minnows too which, sadly, are retail punter’s favourite stocks to speculate in.

In terms of the most popular sectors, Banking leads the list with 18% of all equity trades being placed inside that sector. The second largest was Mining with 15%, followed by Retail with 11%, Construction with 10%, and Other Finance at 9%. Unfortunately, popularity of sector doesn’t mean profitability.

In terms of profitability, the banking bet seems to have paid off, as clients closed the year with an average return of 18% of initial risk on the sector. Mining traders weren’t that lucky and punters en bloc end up losing 15% on average. So it was a great year for banking and ugly for mining, and this is the main reason why FTSE 100 failed to deliver better returns as this index is heavily-weighted with mining stocks. An uncertain future for Europe and the US along with nagging fears throughout most of the year over Chinese growth weighed negatively in Mining. Since the start of the year the Mining sector has outpaced the wider market and in particular our top picks of the year have headed the list of best performers – Bumi & ENRC. Here’s hoping you’re making money out of your spreadbet account!

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