Investing and Investment Education and Tutorial

Short Selling a Stock

Selling short is a way investors make money on stocks that they believe are going to decline in price in the near future.

Shorting, while offering a smart way to make bearish bets, carries significant downside risks.

To sell a stock short, you borrow the shares from your broker, then sell the shares and hold the money and wait for the stock to fall.

If it does fall, you buy the shares at the lower price and give them back to your broker.

Short Selling a Stock

If you short a stock whose price rises, things can get really ugly.

You can wait to see if the stock will decline, or you buy the stock back at a higher price than you sold them and give them back to your broker and take a loss.

When you designate an order as a short sale, you are borrowing the shares from your broker.

Your broker sets up a margin account -- it's a credit that has to be repaid at some time, depending on the discretion of your brokerage firm.

If the stock you are shorting rises, investors have to put more money into the account.

Buying or shorting stocks on margin carries heavy risks for average investors.

When you close out a short sale, known as short-covering, you repurchase the shares and give them back to your broker.

Covering your short position at a loss can get ugly during a short squeeze.

A squeeze occurs when a stock that has been shorted by many investors rises.

More and more short-sellers must buy shares to cover their short positions, putting greater upward pressure on the stock price.

You can short a stock for as long as you want; unless your broker demands you give back the stock that you borrowed.

Because of the costs and risks associated with short-selling, most individuals have no real need for short-selling in a diversified portfolio.

Investors Make Money on Stocks

However, many financial planners suggest that individuals satisfy their urge for betting on the market by making side bets on individual stocks.

As long as an investor is aware of the additional pitfalls and realizes the potential for limitless losses, short-selling can make for a reasonable side bet.

The trick, as with investing in stocks on the long side, is picking the right stocks.

Unfortunately, even if you do an in-depth fundamental analysis of a company and determine the stock is overvalued, the stock can still climb.

Investors looking to protect their short bets should consider the following:

Set a limit on how much you are willing to lose on a short bet, stick to it and you should consider hedging their bets through options.


Communism vs Socialism

Communism and socialism are two left-wing schools of economic thought, which both oppose capitalism.

Communism vs Socialism 1

These ideologies have inspired many social and political movements since the 19th century.

Several countries have been or are currently governed by parties calling themselves communist or socialist, though these parties' policies and rhetoric vary widely.

Communism is generally regarded as hard-left, making fewer concessions to market capitalism and electoral democracy than do most forms of socialism.

As a system of government, communism tends to center on a one-party state that bans most forms of political dissent.

Communism vs Socialism 2

Socialism, on the other hand, can refer to a vast swath of the political spectrum, in theory and in practice.

Its intellectual history is more varied than that of communism: the Communist Manifesto devotes a chapter to criticizing the half-dozen forms of socialism already in existence at the time, and proponents have taken just about every left-of-center stance on the ideal structure of economic and political systems.

Socialists can be pro- or anti-market. They may consider the ultimate goal to be revolution and the abolition of social classes, or they may seek more pragmatic outcomes suach as, for example, a universal pension scheme.


Κατεβάστε δωρεάν την εφαρμογή "Charami SA" στο κινητό σας και πάντοτε θα έχετε άμεση και επίκαιρη ενημέρωση για όλα τα θέματα του κλάδου της υγείας, της ομορφιάς και της ευεξίας. Επιλέξτε το αντίστοιχο με τα ενδιαφέροντά σας "κουμπί" και περιηγηθείτε στο περιεχόμενό του!

By using this site you agree to our use of cookies.