Back in the summer of 2008 Mervyn King gave the startling news that the average family's standard of living would ?stagnate?. This is hardly news as the same thing happened (pretty much) last year and the year before. The huge rise in personal debt is evidence that many people have been financing any increase in their living standards by increased levels of debt. One assumes by the word ?stagnate? that he actually means ?get worse?.



Whilst many may not be feeling the pinch directly it must be remembered that our pensions were invested in many of the complex securities (read US Mortgage Market). Therefore until we get our next pension fund update we have little idea of how much we have lost. In fact even then we may not find out for some time.

Does that mean we should be managing our own funds and portfolios? Many people do. Many do not. Should you? That depends upon a lot of factors besides some commentators are suggesting that the best place for your cash'is cash. Looking at UK shares you can see their point, there is little potential for growth and a lot of risky stocks. Of course, now that interest rates are decreasing that may change.

One of the key problems with shares is that most corporates do not have the cash just lying around for any development projects, growth strategies, infrastructure improvements etc. They will generally tap the credit markets as a way to oil the wheels of growth. With the credit markets still in deep freeze and the bond markets becoming ever more illiquid the prospects for future growth becomes ever more terminal.

But if you believe there will be a long recession and things will get worse then one interesting option is spread betting through companies like FinancialSpreads.com and . I do not believe that spread betting is the be-all-and-end-all however it can help balance an awkward portfolio.

Apart from the benefits of being able to bet on most markets to go down, the UK regulator, the Financial Service Authority, forces these companies to keep their client funds ring-fenced from operational resources. So even if one of these companies ran into problems your funds would remain safe. Not many places offer that.

Of course, in reality, financial spread betting is one the few industries that is thriving in the current market conditions. There may be a temporary ban on betting on Financial Stocks to go down but you can still bet on thousands of other shares, commodities like Crude Oil or Gold, Foreign Exchange rates and the major world indices like the FTSE 100 or Dow Jones to go down. If you think the markets will go down then spread betting lets you speculate on that.

Are there any drawbacks? Yes. Spread betting carries a high level of risk and you can lose more than your initial investment. You need to make sure you only trade with money that you can afford to lose.

Like the adverts say; spread betting may not be suitable for all classes of investor. Make sure you fully understand the risks involved. If necessary, seek independent financial advice.

On the plus side, whilst you need to appreciate that tax laws can and do change, at the moment, one of the other important positives with is that your profits are tax free if you live in UK.

So, as with all investments, caution is advised but there are some interesting benefits.