Lately in this blog, we’ve been talking a lot about stock picking strategies. When you get right down to it, the whole essence of investing in the stock market boils down to being able to pick the right stocks at the right time. This is largely a matter based on “luck”, but that doesn’t stop people from trying to devise systems to make it more comprehensible and certain. And some of those systems, as we’ve seen, actually do make a lot of sense.
Handling Your Investments
Starting with this entry, though, we’re going to shift gears a little bit. We’re going to begin taking a more in-depth look at topics related to how to handle your investments once you’ve actually identified the stocks that you care to put your hard-earned money into.
The first of these techniques that we’re going to explore is known as short-selling. If you’ve been investing for a while, then there were probably a few occasions on which you just knew that a stock was about to collapse under its own weight. Maybe you wondered if it was possible to profit off of a situation like that, increasing the value of your portfolio substantially, even during a bear market?
Short Selling Is The Answer
Well, it’s entirely possible. What’s more, it’s something that is done every single day on the market by confident traders who know how to make the most of a “bad” situation. What makes it possible is short-selling.
Short selling works almost the complete opposite of a typical investment. When most people buy stocks, they try to buy at a low price, and then hold onto their investments as their value grows over a period of time. Once the value has risen, they sell their investments (hopefully for a profit). Short selling, however, is when your purchased stock earns you money only when its value goes DOWN!
How does it all work? We’ll take an in-depth look next time.
See you next week for part 2 of Short Selling.
Sean Rasmussen
The Bullhunters Guide
Universal Wealth Creation © 2004 – 2008
{ 4 comments… read them below or add one }
So I guess ANZ may be worth a look at the moment followed by some other banking institutions, hmmmmmm
Allen
You make some valued pionts here Sean selling short makes sence to me in this market at present it may keep going but as syre as eggs are eggs the minute you go for that extra you will miss the small profit you did have. looking forward to next week. (hows that coffe going) have you caught up yet i have started on your new book the year of the affiliate.
regards richard
Hi Sean,
I’m not sure I fully get this. How does your stock that is going down make you money? I’m going to have to keep reading. I thought you’d either have to hold onto the stock to weather the storm.
Or, try to sell it to minimise your losses.
Short selling a stock is the act of selling when it is going down and making a premium on it all the same.
You sell to enter and buy to exit in short selling and I have done this with Forex, eMinis and Commodities.