Trading with no money

I don’t think this is a good way to start investing. Spreadbetting can be used by experienced investors to avoid taxes, but in amateur hands it’s much more likely to produce losses.

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Seven ways to invest in the stock market when you’ve got no money, trading with no money.

I’m including it only for the sake of completeness. You’ll have a lot of fun, but you’ll probably not beat it after costs – meaning you’ll see the benefits of an index tracker early without wasting any real money chasing shares.

Seven ways to invest in the stock market when you’ve got no money

A s the author of a blog about investing and getting richer, I’m keenly aware that most people who read money blogs are in debt and trying to stop themselves getting poorer.

It’s no coincidence then that the most successful personal finance blogs are about struggles to get out of the red.

Obviously that’s bad news for me, since it means far fewer potential readers of my writing.

But it’s also bad news for these debt-ridden folk.

Investing is like any other positive habit – you need to start investing early and repeat it often to see the benefit. The longer you put it off, the harder it will be to grow a nest egg to replace your salary or enable you to retire early.

With this in mind, here are a few ideas for how cash-strapped surfers who stumble upon monevator might start investing while funds are low.

(if you’re a debt or frugality-focused blogger or reader, please do pass on these ideas to others!)

Should you invest yet?

Before we start, I have to say that if you’ve got big debts on anything other than mortgage-level rates, you should get out of debt before you start putting money into the stock market.

It doesn’t make sense to be paying interest on a credit card of 20% when the average pre-tax return from shares over the long-term is 10%.

That said, I’ve even got a couple of ideas to help such people get acquainted with the ins and outs of investing before you’ve any real money. Read on!

1. Fund your investing first

Assuming you’ve simply got no money left at the end of the month – as opposed to debts to pay off – then your already in a better place than many. Congratulations!

Your next step should be to set up a direct debt to regularly take money out of your current account to a savings account earmarked for investment.

How much? I’d suggest 10% a month is a good target, but anything is better than nothing. (I’ve saved as much as 50% at times!)

Even 5% of your income might seem impossible at first, but commit to do it and you’ll find it’s possible.

If you have a pay raise or similar that you can redirect towards investing, it’s even simpler – redirect the whole increase to build up your investment funds.

2. Set up a paper portfolio

Before investing, you need to build up an emergency cash fund in case of any unexpected hard times. About three to six months income should do it.

In the meantime, discover how hard it is to beat the market picking stocks by setting up a demo portfolio using tools on sites like yahoo.

Or simply run a pretend fund in a spreadsheet or on a notebook.

Set yourself a fantasy investment figure of say £100,000 and put the money into shares as you see fit. Don’t forget to take into account commission fees, and the spread on the shares, as well as any taxes in your territory (0.5% when you buy here in the UK).

Every so often, compare your portfolio to an index such as the FTSE 100.

You’ll have a lot of fun, but you’ll probably not beat it after costs – meaning you’ll see the benefits of an index tracker early without wasting any real money chasing shares.

3. Join (or set-up) an investment club

Investment clubs are monthly gatherings of a dozen or more people who pool their cash and their ideas to grow a communal share portfolio.

They’re often done for sociable fun as much as for profit. With a monthly subscription of say £25, you may find your drinks’ bill at the monthly gathering equals your investment outgoings!

However, they’re a great way to learn more about shares. UK investors can find out how to set one up from proshares while US investors will find more information from the SEC here.

4. Start a modest monthly investment plan

In both the US and the UK there are so-called sharebuilder investment platforms that enable you to buy tiny amounts of shares cost effectively, provided you’re prepared to declare in advance what shares you want to buy and take the market price on the day your order is executed.

Another option is to put money into an investment trust, which here in the UK have savings plans that will accept as little as £50 a month in regular savings.

As I’ll show below how, even small regular additions can really add up over the long term.

If you can, choose an investment vehicle that’s sheltered from tax (here in the UK that means putting it into an ISA).

5. Open a spread betting account

Spread betting accounts enable you to bet on the direction of a share price.

Theoretically you could fund an account with just enough money to place a bet, open a position on a share price rising (or bet against a share you think is going to fall), and grow your investment pot from there.

In practice, the ups and downs will probably shake out any small positions sooner or later, and such platforms are also designed to encourage you to over-trade, which usually reduces returns.

I don’t think this is a good way to start investing. Spreadbetting can be used by experienced investors to avoid taxes, but in amateur hands it’s much more likely to produce losses. I’m including it only for the sake of completeness.

6. (possibly) seize control of your pension

Even though you’re short of cash, if you’re middle class and middle-aged you might well have built up a decent pension pot.

If it’s a personal pension and you’re disappointed by the returns compared to the market (or the charges levied on it), you could consider transferring it to a self invested personal pension (SIPP) and being responsible for its fate yourself.

Definitely talk to an accountant or financial advisor (and probably your employer) before doing anything like this though, and don’t be tempted to gamble away your retirement income on risky stock picks until you’re sure of what you’re doing!

For most people a cost-effective index-tracking pension is going to deliver the best returns.

7. Consider (carefully!) releasing some equity

Perhaps you’re quite well off but you’ve always put your money into bricks and mortar?

If you’re property asset rich but cash poor, you could consider using some of the equity in your home to underwrite a debt that you put into the stock market.

Remember, despite the positive sounding name – ‘equity release’ – all you’re doing is taking on debt that will need to be repaid.

The only reason the debt is related to your property’s value is it gives the bank security that if you fail to repay what you owe it can seize your assets. It’s not free money!

That said, given all the spendthrifts who remortgaged to release cash for holidays and new cars throughout the property boom, remortgaging to get a modest £10,000 to kickstart an investment programme seems to me a fairly responsible activity.

Do read my series on borrowing to invest, however, as even cheap mortgage debt needs to be invested carefully and cost effectively if it’s to deliver a positive return over the long term.

And finally: read, read, read

Perhaps the best thing you can do while you save up for your first investment is to learn more about investing.

There are loads of good books about investing (try oblivious investing) and you can also subscribe to monevator and other blogs to learn more about how to invest while you build up your warchest.

Remember, compound interest, which is so deadly when you’re in debt, is on your side when you invest.

An investment of just £50 a month started when you’re 30 could be worth £178,000 by the time you’re 65, assuming a 10% return.

If you delay starting until you’re 40, your £50 a month plan will net you just £65,000.

Make it your mission to start investing ASAP!

Thanks for reading! Monevator is a simply spiffing blog about making, saving, and investing money. Please do check out some of the best articles or follow our posts via facebook, twitter, email or RSS.

How to trade forex if you have no money

Hi traders! Do you want to know how to trade forex if you have no money? You can find it in the below article:

How much money can you expect from trading?

Many traders start with small accounts sized up to $5,000 USD and hoping to reach financial freedom. If we need $2,000 USD every month for a day to day living, we must increase the value of the account by 40% every month. However, such an increase in value is not realistic. Based on my own experience, I know that one can realistically expect 4-7% growth per month.

Having excessively high expectations usually cause frustration and the trading itself is suffering. We tend not to be concentrated, trade excessive position sizes and we are forced to make common mistakes such as over trading or the inability to close the loss or on the other side, hoping for an unrealistically high profit from a single trade.

If you don’t have $50,000 – $100,000 USD and still want to trade responsibly and financially meaningfully, the answer can be the in this offer – offer 1.

[learn all about it in this intuitive video]

At FTMO, they provide up to $100,000 USD to talented traders, who prove their discipline and precise compliance to follow their own trading plan. The selection of suitable traders works on a monitored demo account that they call the challenge. In the challenge, traders have to make 10% during 30 calendar days. The evaluation is really motivating, and it goes hand in hand with the maximum permitted loss of 10% as well. So, in the challenge itself, they want you to make 10% while not losing 10% of the initial capital. The required profit and the maximum permitted loss are then perfectly balanced as 1:1 which is pretty fair.

All traders who are successful in the test, will sign a contract with FTMO about managing their capital. The profits from the funded accounts are split as full 70% for the trader and 30% for FTMO.

In the table below, you can see the account sizes offered by FTMO together with calculated long-term evaluation expectations.

Let’s compare the account value growth in a small $5,000 USD account, together with the $100,000 USD sized account offered by FTMO. For example, let’s assume that the account value grows by 7%. The final profit in a small $5,000 USD account would be $350 USD. On the other side, the FTMO account sized $100,000 USD will appreciate by $7,000 USD, however you have to deduct those 30% that FTMO reserves for themselves. You will be left with $4,900 USD net, which is pretty much the salary of a bank financial analytic ora senior IT specialist.

With a small personal account of $5,000 USD, that most retail traders normally trade with, it is simply not realistic to trade for a living. You would really need to risk excessively and rather gamble than trade. Bigger accounts are not only better for trader’s psychology but it also makes trading much more effective.

With FTMO, you can get that $100,000 USD for trading completely free of charge as they will reimburse your initial fee with the first profit withdrawal. I truly believe that their offer might be interesting for a number of serious traders from our community.

I wish you best of luck in your trading and success if you take the exam!

And remember – those who pass the exam, will be accepted to talk 1 on 1 with me about their trading!

For any questions – please contact us at support@vladimirribakov.Com

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How to trade with no money – paper trading explained

Trade without money? Is it really possible?

I am very sorry to say that there is no real way of earning real money through trading in the stock market without any capital. Risk and profit only go together. You can not make money without risking some. That is just how the market works. There is nothing you can do about that. But before you leave, I can tell you that there may actually be a way of investing into the market without capital. Ever heard of paper trading?

What is a paper trade?

Paper trading requires no starting capital at all. That is because (virtual) paper trading is trading with fake or virtual (paper) money. This means that all your risk is fake and only virtual. This of course also means that all your profits from this paper money are only on paper or virtual as well. This may sound boring to some, but it really is not. There are plenty of benefits of paper trading, especially for beginner traders. Nevertheless, paper trading does not necessarily translate into real trading just as good as some think it does. Just because you are profitable in a paper trading account, does not mean that you will be profitable in a real live trading account. There are a variety of reasons why this is the case. I will try to break down the advantages and disadvantages of paper trading, as well as the way I would recommend someone to use paper trading.

Should you paper trade?

There are plenty of benefits to paper trading. But this does not mean that paper trading is perfect, paper trading also has some disadvantages.

Probably the greatest benefit of paper trading is that it carries no risk whatsoever. Theoretically you can do whatever you want. No matter what happens with your paper trading positions, you won’t lose any real money. Therefore, paper trading is a great way of practicing your trading activities.

Additionally, paper trading gives you a great introduction to trading. It gives you the opportunity to put what you learned in theory into practice without risking anything.

Not only is paper trading a good introduction to trading, but also a great introduction to a trading platform. When you sign up to a new broker and don’t know the trading platform that well yet, paper trading is a great way of getting to know it. With paper trading you can easily learn how to use and navigate through everything allowing you to make mistakes that don’t cost you money.

Even though paper trading is a great practice medium, it nevertheless is not the same as real trading. Every real trader will tell you that. No matter how serious you try to take it, you will never paper trade exactly like you would trade with real money. This is because you automatically have a different mentality when you are trading with fake money. A human being acts totally different when his/her hard-earned money is at risk. Paper trading is much more forgiving and therefore you will act much less caring.

Paper trading has unlimited retries. This may be a good thing when practicing, but you don’t have any retries when trading with real money. This again will create less respect for the money and therefore will lead to a different trading behavior.

Furthermore, many platforms handle paper trading accounts much differently than they handle their real trading accounts. This of course does make sense in some cases. But it doesn’t necessarily make sense in things like commissions and filling times. Usually orders will get filled much faster in paper trading accounts. Some order that get filled in paper trading accounts, would never get filled in real live trading accounts. The same applies for commissions. Many paper trading platforms either do not have commissions or have very cheap commissions. This creates another unreal trading environment.

Another drawback of paper trading is that it is mostly used on a short term basis. When someone uses paper trading to test out some strategies, he or she normally uses it no longer than a few weeks to months. This is not enough to really see if a strategy is profitable in the long run. Additionally, because paper trading only uses fake money, people just want to try out things fast and see if they work. Understandable, no one wants to sit around and wait many months to see if his/her virtual money would actually create a virtual profit.

A final big downside of paper trading is that you can not really acquire a good trading mentality. This is one of the things that only can be done through real trading. The emotions of human beings are naturally attached to things that mean a lot to them. Money is one of these things. But there is no way to really get emotionally attached to fake/virtual/simulated/paper trading money. Therefore, paper money losses won’t affect someone as much as real losses would.

Conclusion

Even though paper trading is far from ideal and does not simulate real trading perfectly, I do think that it is a great learning tool and therefore I do recommend it. There really is no real reason why one should not try it. It does not cost anything and it is risk free. One really has nothing to lose when paper trading. I think it is a perfect way of getting your platform and trading to know.

Where to paper trade?

There are many different ways to paper trade. For example, you can paper trade with real paper by writing you entry and exit prices down or you can use an online program or you can use your broker platform. Most (good) brokers nowadays do offer paper trading. Usually they allow you to easily switch between your actual live trading account and a virtual trading account. If your broker does not offer this, you may want to consider changing your broker (here are some recommendations) or you have to find an online platform.

I would most definitely recommend using your broker to paper trade. Paper trading with actual paper really is just so much more complicated and unnecessary. Furthermore, it takes away some benefits of paper trading. Besides, many people would easily cheat when paper trading with actual paper, because it is so easy to cheat.

The reasons why I do recommend that you use your broker to paper trade are, because you will get to know this exact platform, which helps you mitigate later mistakes with real money. Moreover, it is just an insanely easy way to paper trade. You won’t have to keep track of anything. The broker will automatically handle everything. They will treat you very similarly to a normal trading account. (furthermore, it can be quite hard to keep track of the P/L of a complex option strategy/spread and portfolio).

How to paper trade properly?

I would say the way you should paper trade really depends on the reason why you want to paper trade in the first place.

If you want to get to know your broker platform and navigating/using it:

I would recommend that you try out as many things as you possibly can. Don’t actually think about your paper trades, just try to order different positions, strategies at different prices to learn how to do that. Additionally, try to understand everything you see. Try to understand your portfolio performance and all the other readings. This will help a lot in later real trading activities. Understanding your personal broker platform is essential and paper trading is a great way to do this. But again, if this is your goal, you should try not to think about the fake money and making a profit with it. Just try out as many different things and get used to the platform. If you do this, you will easily learn the platform by doing stuff. This is one great way to use paper trading, because you could/would never do this with your real money.

If you actually want to test a strategy: (for example my consistently profitable strategy. To learn more about my strategy, click here)

You should try to set all the starting criteria as close to the actual one. With this I mean that you should set your starting amount to your actual real starting amount and actually do trades the same way you would with real money. To ensure that you don’t use more money than you actually could, I highly recommend that you delete the rest. If you can’t do this by yourself, you could contact your broker real fast and they would do it with a pleasure. When testing this new strategy, you should try to act as real as possible. This can’t be done to a full extent, but it can certainly be done to a certain degree. What this means is that you take your time before every entry, don’t allow for any retries and don’t make up any excuses. I often find when paper trading and testing things if I lose I tell myself that the loss just was an exception or I just made a wrong entry. Do not do that. Count every loss and look at your overall P/L. To make it as realistic as possible you could ask yourself, if you theoretically would make this trade with your actual money, before every entry. Don’t think of the fake money as fake money. Act like you care, even though that can be harder than you think. But if you test out a strategy with a ‘not caring mentality’, it won’t be a good test of this strategy, because you didn’t test it the way you would later use it.

Paper trading inside of optionshouse broker platform

Nevertheless, no matter what you do, paper trading still won’t be the same as real trading.

How long should you paper trade before trading with real money?

Many people ask how long one should paper trade, before moving on to real trading. I don’t think there is one correct answer to this question. It also really depends. But I would say that before trading with real money, someone should definitely know his/her broker platform if you now learn how to use your broker platform through paper trading or not, is still up to you. Otherwise, I would say that it depends on if you feel ready for your first real trade. But I would not necessarily say that one has to have had a specific percentage gain in paper trading before trading real money. In the end it really comes down to when someone feels ready and prepared.

Can you paper trade options and other derivatives or only stocks? – virtual options trading

Paper trading is not only a good way to practice stock trading with fake money, but it is also a great way to get into other types of trading. Nowadays everybody can paper trade with ease. No matter if you are an option, futures, forex or whatever kind of trader, you will be able to paper trade options, paper trade futures, paper trade forex etc. Most brokers allow you to do that.

4 replies to “how to trade with no money – paper trading explained”

What a great explanation of paper trading. Whether it’s stocks, options or futures, there are ways to paper trade and what this really means is that you have an opportunity to PRACTICE ! Sure, you may not be a free swinger when using your own money, but you will have some knowledge of how the markets work and this leads to confidence. As in anything, confidence sends you into the arena with your eyes wide open.

You are absolutely right.

Excellent information and something I have tried in the past. Sadly I found that the reality between paper trading and real-time trading with your own money were two completely different beasts. It was, and is, an excellent way of learning the platform interface without the worry of making mistakes but not, in my opinion, for testing out strategies.

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Seven ways to invest in the stock market when you’ve got no money

A s the author of a blog about investing and getting richer, I’m keenly aware that most people who read money blogs are in debt and trying to stop themselves getting poorer.

It’s no coincidence then that the most successful personal finance blogs are about struggles to get out of the red.

Obviously that’s bad news for me, since it means far fewer potential readers of my writing.

But it’s also bad news for these debt-ridden folk.

With this in mind, here are a few ideas for how cash-strapped surfers who stumble upon monevator might start investing while funds are low.

(if you’re a debt or frugality-focused blogger or reader, please do pass on these ideas to others!)

Should you invest yet?

Before we start, I have to say that if you’ve got big debts on anything other than mortgage-level rates, you should get out of debt before you start putting money into the stock market.

It doesn’t make sense to be paying interest on a credit card of 20% when the average pre-tax return from shares over the long-term is 10%.

That said, I’ve even got a couple of ideas to help such people get acquainted with the ins and outs of investing before you’ve any real money. Read on!

1. Fund your investing first

Assuming you’ve simply got no money left at the end of the month – as opposed to debts to pay off – then your already in a better place than many. Congratulations!

Your next step should be to set up a direct debt to regularly take money out of your current account to a savings account earmarked for investment.

How much? I’d suggest 10% a month is a good target, but anything is better than nothing. (I’ve saved as much as 50% at times!)

Even 5% of your income might seem impossible at first, but commit to do it and you’ll find it’s possible.

If you have a pay raise or similar that you can redirect towards investing, it’s even simpler – redirect the whole increase to build up your investment funds.

2. Set up a paper portfolio

Before investing, you need to build up an emergency cash fund in case of any unexpected hard times. About three to six months income should do it.

In the meantime, discover how hard it is to beat the market picking stocks by setting up a demo portfolio using tools on sites like yahoo.

Or simply run a pretend fund in a spreadsheet or on a notebook.

Every so often, compare your portfolio to an index such as the FTSE 100.

You’ll have a lot of fun, but you’ll probably not beat it after costs – meaning you’ll see the benefits of an index tracker early without wasting any real money chasing shares.

3. Join (or set-up) an investment club

Investment clubs are monthly gatherings of a dozen or more people who pool their cash and their ideas to grow a communal share portfolio.

They’re often done for sociable fun as much as for profit. With a monthly subscription of say £25, you may find your drinks’ bill at the monthly gathering equals your investment outgoings!

However, they’re a great way to learn more about shares. UK investors can find out how to set one up from proshares while US investors will find more information from the SEC here.

4. Start a modest monthly investment plan

Another option is to put money into an investment trust, which here in the UK have savings plans that will accept as little as £50 a month in regular savings.

As I’ll show below how, even small regular additions can really add up over the long term.

If you can, choose an investment vehicle that’s sheltered from tax (here in the UK that means putting it into an ISA).

5. Open a spread betting account

Spread betting accounts enable you to bet on the direction of a share price.

In practice, the ups and downs will probably shake out any small positions sooner or later, and such platforms are also designed to encourage you to over-trade, which usually reduces returns.

6. (possibly) seize control of your pension

Even though you’re short of cash, if you’re middle class and middle-aged you might well have built up a decent pension pot.

For most people a cost-effective index-tracking pension is going to deliver the best returns.

7. Consider (carefully!) releasing some equity

Perhaps you’re quite well off but you’ve always put your money into bricks and mortar?

If you’re property asset rich but cash poor, you could consider using some of the equity in your home to underwrite a debt that you put into the stock market.

Remember, despite the positive sounding name – ‘equity release’ – all you’re doing is taking on debt that will need to be repaid.

The only reason the debt is related to your property’s value is it gives the bank security that if you fail to repay what you owe it can seize your assets. It’s not free money!

Do read my series on borrowing to invest, however, as even cheap mortgage debt needs to be invested carefully and cost effectively if it’s to deliver a positive return over the long term.

And finally: read, read, read

Perhaps the best thing you can do while you save up for your first investment is to learn more about investing.

There are loads of good books about investing (try oblivious investing) and you can also subscribe to monevator and other blogs to learn more about how to invest while you build up your warchest.

Remember, compound interest, which is so deadly when you’re in debt, is on your side when you invest.

An investment of just £50 a month started when you’re 30 could be worth £178,000 by the time you’re 65, assuming a 10% return.

If you delay starting until you’re 40, your £50 a month plan will net you just £65,000.

Make it your mission to start investing ASAP!

How to trade forex if you have no money

Hi traders! Do you want to know how to trade forex if you have no money? You can find it in the below article:

How much money can you expect from trading?

If you don’t have $50,000 – $100,000 USD and still want to trade responsibly and financially meaningfully, the answer can be the in this offer – offer 1.

[learn all about it in this intuitive video]

All traders who are successful in the test, will sign a contract with FTMO about managing their capital. The profits from the funded accounts are split as full 70% for the trader and 30% for FTMO.

In the table below, you can see the account sizes offered by FTMO together with calculated long-term evaluation expectations.

I wish you best of luck in your trading and success if you take the exam!

And remember – those who pass the exam, will be accepted to talk 1 on 1 with me about their trading!

For any questions – please contact us at support@vladimirribakov.Com

How to invest in amazon

4 advantages of amazon investing - read more

Amazon’s net a bullish 450% 5-year gain

Amazon’s ROI is 6x’s the S&P 500 index of 67%

AMZN shares may hit +$10,000 by mid-november 2024

Amazon’s growth since IPO tops more than 12,000%

Now is the time to invest in amazon

Hidden divergence – 3 KEY TRADING TIPS

How to trade against the trend – REVERSAL TRADING STRATEGY

How to trade range breakout with price action (NO INDICATORS)

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Trading with no money

Published: 21:52, 9 january 2021 | updated: 11:02, 10 january 2021

While a host of apps have brought the opportunity to buy and sell shares at no cost to the UK, some also offer the chance to bet on shares and other assets using high risk cfds (contracts for difference) - derivatives that can let people go long, short, and trade with borrowed money.

Investors and people trading shares on a daily or weekly basis have been warned about this latter element. Platforms must carry a warning on cfds about how many customers lose money when trading - and these often say that the number is greater than 70 per cent.

We explain what you need to know to tread carefully when looking for free share dealing.

Roulette? Critics say some websites are offering free share dealing but also promoting financial products unsuitable for long-term investing

Concerns are rising over the emergence of new-style online trading platforms that offer free share dealing but also encourage stock market novices to invest in complex financial instruments.

Critics say the websites, which offer free trading, are promoting financial products unsuitable for long-term investing – taking advantage of the fact that hundreds of thousands of britons are looking to better the miserly returns they earn on cash deposits.

While a host of apps have brought the opportunity to buy and sell shares at no cost to the UK, some also offer the chance to bet on shares and other assets using cfds (contracts for difference) - derivatives that can let people go long, short, and trade with borrowed money.

Meanwhile, research has shown that as many as 80 per cent of premier league football clubs have official sponsors that sell cfds and cryptocurrency, according to financial advice firm openmoney.

One expert says the new platforms are no more than online 'gambling venues', while others are keen for the regulator to step in so that novice investors do not end up losing money in highly speculative trades.

Some have already raised their concerns with the financial conduct authority.

One of the most popular websites is etoro. It has attracted half a million new customers of all ages in the UK in the past year.

A rival called trading 212 has grown the assets on its platform from £100million at the start of last year to more than £1.2billion today. Its app is now the third most downloaded free financial app on apple devices.

Natwest's online banking app ranks just tenth.

Both etoro and trading 212 offer free trading – unlike the traditional wealth platforms provided by the likes of AJ bell and hargreaves lansdown. They also let investors buy fractions of shares – attractive to novices looking to invest small sums.

The online marketing tools used by etoro are sophisticated. If you type 'how to start investing' into google one of the first results that comes up is etoro. Its platform is easy to use and ideal for those who want to gamble on bitcoin or another flavour of the month, such as electric car maker tesla.

Yet the array of complex investments it offers means that it is required to carry a disclaimer on its website: '71 per cent of retail investor accounts lose money when trading cfds with this provider.'

Cfds are contracts for difference and differ markedly from real shares (see box).

Why cfds are such a gamble

The cfds that you can trade on the likes of etoro are 'contracts for difference'. These are financial instruments that allow you to place a bet on whether you think an asset will rise or fall in value.

For example, if you think the share price of microsoft is going to rise you could buy a CFD that pays out if you are proven right. You lose money if the share price falls. The big difference is that you do not own the microsoft shares.

The attraction is that with a CFD you can use leverage – effectively debt – to increase the size of your bet. This means that if your prediction is correct, you make several times more money than if you had bought the shares outright.

However, your losses will also be far greater and in general, most private investors lose money on cfds.

The platform also lacks the tools needed to build long-term wealth. So etoro doesn't offer investors a chance to buy funds or investment trusts – the fundamental building blocks on which most sound portfolios are built – though it does offer exchange traded funds.

Nor does it offer individual savings accounts or self invested personal pensions – the wrappers that keep investments free from tax.

For traders who want a punt, know what they are doing, and are not investing for the long term, these websites can be fun to use.

But critics believe they blur the lines between what they do – and what traditional wealth platforms provide.

For example, trading 212 carries a table comparing its fees with traditional rivals such as hargreaves lansdown, suggesting they are of a similar ilk.

Two traditional wealth platforms, interactive investor and freetrade, have written to the regulator claiming that some of these new trading platforms are misleading investors by drawing them in with free share trading – before pointing them towards risky financial instruments.

Neither interactive nor freetrade sell cfds. Alex campbell, at freetrade, says: 'there has been an explosion in interest in share dealing and there are lots of positives and negatives as a result.

'but we are concerned when platforms offer free share dealing as a loss leader to get customers through the door – and then offer them risky financial products.' richard wilson, chief executive of interactive investor, says: 'it's fine to put a tenner on tesla for a bit of fun, but you wouldn't bet your pension on it.'

He adds: 'it needs to be quite clear when you go on to a website whether you are entering a gambling venue or a wealth platform.'

HOW THIS IS MONEY CAN HELP

Football giants cashing in, too.

Worryingly, as many as 80 per cent of premier league football clubs have official sponsors that sell cfds and cryptocurrency, according to new research for financial advice firm openmoney.

While the link between football and betting firms has come under scrutiny recently, risky online brokers have no restrictions on how they promote their services to fans.

Clubs including everton, leicester and crystal palace have a partnership with etoro. Until lockdown, it was hosting free trading lessons at stadiums. Leeds united has a partnership with FXVC, and chelsea with go markets. Both are CFD brokers based in cyprus.

Up to 88 per cent of FXVC customers and 44 per cent of go markets customers who invest in cfds lose money, they reveal on their websites. Anthony morrow, co-founder of openmoney, warns that cfds 'are no different to gambling with your cash'.

He adds: 'as a financial adviser, we'd say these complex, sophisticated investments have no place in people's financial plans.

'the fact that these high-risk investments can be promoted to football fans through club sponsorship and advertisements during matches without any restrictions is wrong.

'most people are unaware of the risky nature of these unregulated investments. I believe there should be far tighter regulations to stop them causing serious financial harm.'

In reply, etoro says that 85 per cent of its assets under administration are real – and not cfds – globally. It says it restricts access to CFD trading by asking customers to complete an 'appropriateness test' first. It says those who don't pass can't buy them.

Are investors right to buy british for better times after lockdown?

It's probably been the gloomiest start to a year for as long as many can remember.

So what happened? The UK stock market jumped, of course. Contrary as this may seem, there is some logic to investors buying into the hope that better times lie ahead.

On this podcast, georgie frost, lee boyce and simon lambert look at what the fresh lockdown means for the economy and why investors are choosing to look straight through it and develop a new appetite for buying british.

Press play above or listen (and please subscribe if you like the podcast) at apple podcasts, acast, spotify and audioboom or visit our this is money podcast page

But the mail on sunday has found a way that customers can circumvent the test: etoro allows its customers to 'copy' other investors on its platform, replicating their portfolios.

So, if you copy an investor who holds cfds, you will be buying them also, whether you have passed the appropriateness test or not.

While etoro says it does not let investors copy the riskiest portfolios, it admits some contain cfds. It told the mail on sunday: 'it's important people understand the risk. We're not here to catch anyone out.'

Holly mackay, of investment website boringmoney, believes regulation of this breed of trading website must be beefed up. She says 'they are regulated in the same way as traditional investment platforms. At some point the regulator must acknowledge there are a lot of people piling into high-risk investments and react with tougher regulation.

'these brokers are more likely to sell the dream of picking the next amazon, whereas traditional platforms are more likely to preach a message of diversifying investments. The latter is less sexy but also less likely to go pear-shaped.'

Mike barrett, a director at financial researcher the lang cat, agrees. He says: 'you can dress up investments as sexy, cool or exciting. But for most people the best option is a middle-of-the-road, sensible investment strategy that they stick to.'

Trading 212, FXVC and go markets did not respond to requests for comment.

Corporation tax: trading and non-trading

Find out about being 'active', trading and non-trading, and being dormant if you’re a new or existing company or organisation.

Overview

HMRC may consider your company or organisation to be ‘active’ for corporation tax purposes when it is, for example, carrying on business activity, trading or receiving income.

In some circumstances, HMRC would not consider your company or organisation active for corporation tax purposes. In this case, your company or organisation is ‘dormant’, for example not active or not trading.

HMRC may also class your unincorporated organisation, such as a members’ club, dormant for corporation tax purposes if it is active or trading but it’s due to pay corporation tax of less than £100 for an accounting period.

What is active for corporation tax purposes

Generally your company or organisation is considered to be active for corporation tax purposes when it is, for example:

Carrying on a business activity such as a trade or professional activity

Buying and selling goods with a view to making a profit or surplus

Providing services

Earning interest

Managing investments

Receiving any other income

This definition of being active for corporation tax purposes is not necessarily the same as that used by HMRC in relation to other tax areas such as VAT, or by other government agencies such as companies house.

It may also not match definitions in the various accounting conventions that are used to prepare audited accounts, such as the financial reporting standards issued by the accounting standards board, or the international financial reporting standards issued by the international accounting standards board.

Tell HMRC your company or organisation is now active

You must tell HMRC within 3 months of starting your tax accounting period if your limited company is within the charge of corporation tax and is now active.

The best way to do this is to use HMRC’s online registration service. You will need to sign in with the company’s government gateway user ID and password. If you do not have a user ID you can create one when you register.

You can also register for corporation tax in writing. Your letter must include:

The company’s name and registration number

The date the company’s accounting period started

The date to which the company intends to prepare accounts

The company’s principal place of business

The nature of the business being carried out by the company

The name and home address of each director of the company

If the company has taken over another business, the name and address of the former business and also the name and address of the person from whom the business was acquired

If the company is a member of a group of companies, the name and registered office address of the parent company

If the company has been obliged to comply with the income tax (pay as you earn) regulations 2003, the date on which that obligation first arose

Signed by a company director or company secretary

Include a declaration that the information is correct and complete to the best of their knowledge

Corporation tax services
HM revenue and customs
BX9 1AX
united kingdom

Unincorporated organisations such as clubs, societies and associations must also tell HMRC if they become active. This should be in writing to the address above.

What is not active for corporation tax purposes

There are a number of circumstances where HMRC would generally consider your company or organisation not to be active for corporation tax purposes.

When your company or organisation has not yet started trading

HMRC considers that your company or organisation has not yet become active or started trading if it has not yet engaged in any business activity (business activity means carrying on a trade or profession, or buying and selling goods or services with a view to making a profit or surplus).

Your newly-formed company or organisation may not be active for corporation tax purposes. However, you may still carry out activities (known as ‘pre-trading activities’) or incur costs (known as ‘pre-trading expenditure’) before you officially open your business without HMRC deeming that you have started trading.

Activities or expenditure to do with setting up a business that are not considered trading by HMRC for corporation tax purposes include:

Preliminary activities such as writing a business plan or negotiating contracts

Preliminary expenditure such as incurring costs with a view to deciding whether to start a business

When your company or organisation has previously traded but has stopped trading

HMRC generally considers a company or organisation to be dormant for corporation tax purposes if it’s no longer carrying out any business activity.

If your business is a company, you should normally already have notified companies house that your company is dormant.

What does dormant for corporation tax mean

Dormant is a term that HMRC and companies house use for a company or organisation that is not active, trading or carrying on business activity. But HMRC and companies house use the term dormant in slightly different ways.

For corporation tax purposes, HMRC views a dormant company as a company that’s not active, not liable for corporation tax or not within the charge to corporation tax.

A dormant company can be, for example:

A new company that’s not yet trading

An ‘off-the-shelf’ or ‘shell’ company held by a company formation agent intending to sell it on

A company that will never be trading because it has been formed to own an asset such as land or intellectual property

An existing company that has been - but is not currently - trading

A company that’s no longer trading and destined to be removed from the companies register

When HMRC will treat clubs and unincorporated organisations as dormant

HMRC may treat your club or unincorporated organisation as dormant for corporation tax purposes if it’s active but both the following conditions apply:

Your organisation’s annual corporation tax liability must not be expected to exceed £100

You run your club or organisation exclusively for the benefit of its members

For each year of dormancy your organisation must not have any:

Allowable trading losses for which it may want to claim relief

Assets it’s likely to dispose of, which would give rise to a chargeable gain

Interest or annual payments to pay out from which tax is deductible and payable to HMRC

HMRC will write to you proposing to make your organisation dormant. They will not send you a ‘notice to deliver a company tax return’ and they’ll review this at least every 5 years. HMRC may also apply this treatment to your flat management company.

But HMRC will not treat your organisation as dormant if it’s a:

Privately owned club run by the members as a commercial enterprise for personal profit

Housing association or you’re a registered social landlord (as designated in the housing act 1986)

Trade association

Thrift fund

Holiday club

Friendly society

Company which is a subsidiary of, or is wholly owned by, a charity

If you have not informed HMRC you are dormant you will still be required to submit a CT tax return. Failure to do so may result in penalties being raised against the company.

Information has been added for companies who have not told HMRC they are dormant but who must still submit a CT tax return to avoid penalties.

The section headed tell HMRC your company or organisation is now active has been updated with a new link to the online registration service.

The section about how to tell HMRC your company is now active for corporation tax has been updated.

Closing a limited company

You usually need to have the agreement of your company’s directors and shareholders to close a limited company.

The way you close the company depends on whether it can pay its bills or not.

The company can pay its bills (‘solvent’)

Striking off the company is usually the cheapest way to close it.

The company can’t pay its bills (‘insolvent’)

When your company is insolvent, the interests of the people your company owes money to (its creditors) legally come before those of the directors or shareholders.

You must arrange the liquidation of your company.

Your company might be forced into compulsory liquidation if you don’t pay creditors.

You may be able to avoid liquidation by applying for a company voluntary arrangement.

If the company doesn’t have a director

You must appoint a new director if your company doesn’t have one, for example if a sole director has died.

Companies house will eventually strike off a company that doesn’t have a director but this can make it more difficult to manage any company assets.

Shareholders must agree to appoint a new director and may need to vote on it.

If a sole director has died and there aren’t any shareholders the executor of the estate can appoint a new director, as long as the company’s articles allow it.

The new director can close the company.

Your company still needs to pay corporation tax and file a tax return even if there’s no director.

Let the company become dormant

You don’t have to close your company if it’s no longer trading. You can let it become ‘dormant’ for tax as long as it’s not:

Carrying on business activity

Trading

Receiving income

Your company will still be registered at companies house.

You must still send your annual accounts and confirmation statement (previously annual return) to companies house.

You can keep a limited company dormant for as long as you want.

So, let's see, what we have: seven ways to invest in the stock market when you’ve got no money A s the author of a blog about investing and getting richer, I’m keenly aware that most people who read money blogs are in at trading with no money